DEPARTMENT OF LAW, PRESTIGE INSTITUTE OF MANAGEMENT & RESEARCH

RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARD

ADRS PROJECT

SUBMITTED IN THE PARTIAL FULFILLMENT OF B.A.LL.B., NINTH SEMESTER

SUBMITTED TO:- SUBMITTED BY:-

ADV. AMAY BAJAJ SHIVAM MADHWANI

Scholar No: 11110100056
CONTENTS

FOREIGN ARBITRAL AWARD...................................................................................................3

I. NEW YORK CONVENTION AWARDS...........................................................................3

II. GENEVA CONVENTION AWARDS..............................................................................8

RELEVANT COURT....................................................................................................................10

TIME LIMIT.................................................................................................................................11

COMPARISON WITH DOMESTIC ENFORCEMENT REGIME.............................................11

CONCLUSION..............................................................................................................................12
FOREIGN ARBITRAL AWARD

Arbitration has emerged as one the favourite Alternative Dispute Redressal mechanisms on the
world stage. An increasing number of business organisations are opting for Arbitration as the
preferred method for resolving their disputes.

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.

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. In January 1996, India enacted a new Arbitration Act. This Act repealed all the three
previous statutes (the 1937 Act, the 1961 Act and the 1940 Act).The new Act has two significant
parts. Part I provides for any arbitration conducted in India and enforcement of awards there
under. Part II provides for enforcement of foreign awards. Any arbitration conducted in India or
enforcement of award there under (whether domestic or international) is governed by Part I,
while enforcement of any foreign award is governed by Part II of the Act.

India recognizes foreign awards under the New York Convention and the Geneva Convention.

I. NEW YORK CONVENTION AWARDS

Definition of Foreign Award

According to Section 44 of the Act a foreign award means an arbitral award on disputes arising
between parties to arbitration, whether in contractual or non-contractual relationship, considered
as commercial under Indian laws enacted on or after the 11th day of October, 1960. But the
country must be a signatory to the New York Convention and recognized by the Central
Government of India as a Convention country and the award shall be passed in the territory of
another contracting country which is a reciprocating territory i.e. the Central Government of
India has notified it as Convention country in its Official Gazette.
The Supreme Court in the case of RM Investments Trading Co Pvt. Ltd v Boeing Co & Anor,
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 commercial
nature, whether contractual or not.

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 & Ors. 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 (which was not
notified). 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 favor of enforcement.

Power of Judicial Authority to Refer Parties to Arbitration

Section 45 of the Act empowers a judicial authority to refer the parties to arbitration at the
request of one of the parties or any person claiming through or under him except in the situation
when the agreement is found to be void, inoperative or incapable of being performed.

Foreign Award when Binding

Section 46 of the Act provides that any foreign award which would be enforceable under this
Chapter shall be treated as binding for all purposes on the persons as between whom it was
made. It may be relied upon by the parties in any legal proceedings in India.

Evidence Required for Enforcement of a Foriegn Award

According to section 47 of the Act a person seeking to enforce a foreign arbitral award shall
make an application to a court, i.e. high court, having jurisdiction in the matter as per the
provisions of the Amendment Act, 2015 and provide,

a) the original award or its certified copy;

b) original arbitration agreement or its duly certified copy; and
c) if the award or agreement is in a foreign language, the party seeking to enforce must
produce a certified copy of a foreign award translated into English; and/or
d) Any other evidence to establish that the award is a foreign award.

The burden of proof is on the party seeking to enforce the foreign arbitral award to prove that it
is a genuine foreign award and the aforesaid documents form a prima facie evidence to establish
the same.

Condition for Enforcement of Foreign Awards

As per section 48 (1) of the Act, a foreign award may not be enforced in India if it is proved by
the party against whom it is sought to be enforced that:

a) the parties to the agreement were under some incapacity to perform under the law to
which they were subjected to and in the absence of any mention of such law, the law of
the country where the award was made, i.e. the place of arbitration, or,
b) the agreement was invalid under the law to which the parties have subjected it and in the
absence of any mention of such law, the law of the country where the award was made,
or,
c) a fair trial was not conducted by the tribunal passing the award by failing to adhere to the
principles of fair hearing, or,
 d) the award passed was partly or wholly beyond the scope of the arbitration agreement, in
which case the part of the award exceeding the scope of submission to arbitration may be
separated from rest of the award, or,
e) the composition of the arbitral tribunal or authority and/or the procedure of its
appointment was not in accordance with the arbitration agreement or in the absence of
any mention of the same in the agreement, it was not in accordance with the law of the
country where the arbitration proceedings were held, i.e. the place of arbitration, or,
f) The award has not yet been made binding on the parties or has been set aside or
suspended by a competent authority of the country which is either the place or seat of
arbitration.

The court may call upon such party making an application under section 48 (1) to provide
evidence to prove the existence of any or all of the grounds for refusal of enforcement of award
as mentioned above.

As per section 48 (2) of the Act, a foreign award may not be enforced in India if it is found by
the court in India that:

a) the settlement of the award is not as per Indian arbitration laws, or

b) The enforcement of the award is contrary to the public policy of India.
This defense should be construed narrowly. It has to be something more than mere
contravention of law to attract this defense. An award is said to be in conflict with the
public policy of India if it has been affected by fraud or corruption or it was in violation
of the of the Act or it was in contravention with the fundamental policy of Indian law or
basic principles of morality or justice.

Section 48 only provides grounds for refusal of enforcement of foreign award and it does not
permit the court to make a review of the foreign award on the merits of the case. It does not
permit the court to exercise its appellate jurisdiction over the foreign award and does not permit
the court to enquire as to whether some error has been committed by the tribunal while passing
the foreign award.

It is further provided that if an application for the setting aside or suspension of the award has
been made to a competent authority, the court may, if it considers it proper adjourn the decision
on the enforcement of the award and may also, on the application of the party claiming
enforcement of the award, order the other party to give suitable security.

In Renu sagar’s case, whilst construing the provisions of Sec 7 (1) (b) (ii) of the Foreign
Awards Act (which reproduced Art. V (2) (b) of the New York Convention), the Supreme Court
of India held that in order to attract the bar of public policy the enforcement of the award must
involve something more than violation of Indian law; the enforcement of a foreign award would
be refused on the ground that it is contrary to public policy if such enforcement was contrary “to
the fundamental policy of Indian law or justice or morality”. It was held that any violation of the
Foreign Exchange Regulation Act, which was enacted for the national economic interest, would
be contrary to the public policy of India. The enforceability of a foreign award could not be
resisted as violating the public policy of India where an award, however, directed payment of
compound interest, or directed payment of compensatory damages or where the arbitral tribunal
had awarded an amount higher than should have been awarded or where costs awarded by the
arbitral tribunal were excessive.

In Supreme Court case of Oil & Natural Gas Corporation Ltd. vs. Saw Pipes Ltd., the
definition of “public policy” in section 34 of the Act was controversially expanded such that
anything which is against any Indian law is deemed to be opposed to Indian public policy. This
means that any foreign awards that are subject to the application of section 34 can be challenged
under wider grounds than would usually be permitted under the New York Convention alone.

Enforcement of Foreign Awards

As per section 49 of the Act if a court decides to uphold the foreign award and enforce it then it
shall be deemed to be a decree of the court and no appeal shall lie against the award so
upheld except for a discretionary appeal to Supreme Court of India under Article 136 of the
Constitution of India when it is a question of fundamental importance or public interest. But in
the case of an award held to be non-enforceable by the court, an appeal may be allowed under
section 50 (1) (b) of the Act.

The decree shall be executed, on application by the decree-holder, in accordance with the
provisions of CPC by the court which passed it.
 II. GENEVA CONVENTION AWARDS

Interpretation

As per section 53 of the Act a foreign award is an arbitral award on disputes relating to matters
which are considered commercial under Indian laws enacted after 28th day of July, 1924 and
comply with the following conditions:

a) The award is in accordance with the agreement for arbitration to which the Protocol laid
down in the Second Schedule of the Act is applicable;
b) The award is with respect to the persons, one of whom is subjected to the jurisdiction of
the country which has been recognized as a Convention party by the Central Government
of India vide notification in the Official Gazette and the other who is subject to the
jurisdiction of any other Convention country so recognized by India through notification
in the Official Gazette.
c) The award has been made in any of the Convention countries so recognized by the
Central Government of India vide notification in the Official Gazette and the award shall
be deemed final only if no legal proceedings or appeal against such award is not pending
in such jurisdictions.

Power of Judicial Authority to Refer Parties to Arbitration

Section 54 of the Act empowers a judicial authority at the request of one of the parties or any
person claiming through or under him to refer the parties to arbitration if it is satisfied about the
validity of the agreement. The section is attracted only if there is an actual reference to the
arbitration.

Foreign Award when Binding

Section 55 of the Act provides that an award which satisfies the conditions of enforceability
mentioned under section 57 of the Act is enforceable and is to be treated as binding for all
purposes and also on persons as between whom it was made. It may be relied upon by the parties
in any legal proceedings in India. Any references to enforcing a foreign award shall be construed
as including references to relying on an award.
Evidence Required for Enforcement of a Foreign Award

According to section 56 of the Act a party seeking to enforce a foreign arbitral award shall make
an application to a court having jurisdiction in the matter as per the provisions of the Amendment
Act, 2015 and provide

a) the original award or its certified copy;

b) evidence to prove that the award has become final and is in pursuance with section 57 (1)
(a) and (c); and
c) if the award or agreement is in a foreign language, the party seeking to enforce must
produce a certified copy of a foreign award translated into English, and/or
d) Any other evidence to establish that the award is a foreign award.

As per the Amendment Act, 2015 the application for enforcement of a foreign award will only
lie to a high court having jurisdiction.

Condition for Enforcement of Foreign Awards

As per section 57 (1) of the Act, there are certain conditions for enforcement of foreign awards
under the Geneva Convention, such as:

a) The award has been passed in accordance with the submission to arbitration by parties;
b) The Indian laws of arbitration allow the settlement of the award;
c) The award has been passed in accordance with the arbitration agreement by the tribunal
or arbitral authority as determined by the parties mutually and according to the law
governing the arbitration;
d) The award has become final in the country where it has been passed and no objections or
appeal or any other proceedings are pending against it;
e) The enforcement of the award is not contrary to the public policy or the laws of India. An
award is said to be in conflict with the public policy of India if it has been affected by
fraud or corruption; or it is in violation of confidentiality provisions of an attempted
conciliation under the Act; or it was in contravention with the fundamental policy of
Indian law or basic principles of morality or justice.
As per section 57 (2) of the Act, a foreign award may not be enforced in India if it is found by
the court in India that:

a) the award has been declared null and void by courts in the country in which it was made;
b) fair trial was not held by the arbitrator, in the sense, that the party was not given a fair
opportunity to be heard or that he was not properly represented by an advocate, pending
which the award has been passed;
c) The award is beyond the scope of the submission to arbitration: Provided that if the
award has not covered all the disputes submitted to the arbitral tribunal, the court may
either postpone such enforcement or grant it subject to such guarantee as the court may
decide.

The party against whom the award has been passed, if he proves, that there exists any other
ground other than mentioned above to challenge the validity of the award, then the court, may,
either refuse the enforcement of such award or postpone the proceedings and give the party
sufficient time to get the award cancelled by the competent tribunal.

Enforcement of Foreign Awards

As per section 58 of the Act if a court decides to uphold the foreign award and enforce it then it
shall be deemed to be a decree of the court. The Arbitration Act and interpretations by the
Supreme Court provide that every final arbitral award is enforced in the same manner as if it
were a decree of the court and as per section 59 of the Act appeals may lie against the order
refusing to refer the parties to arbitration under section 54; refusing to enforce a foreign award
under section 57. Generally, no second appeal shall lie from the order passed in the appeal under
section 58 but right to appeal to Supreme Court is not barred.

RELEVANT COURT

The Indian Supreme Court has accepted the principle that enforcement proceedings can be
brought wherever the property of the losing party may be situated. This was in the case of Brace
Transport Corp of Monrovia v Orient Middle East Lines Ltd. The court here quoted a
passage from Redfern and Hunter on Law and Practice of International Commercial Arbitration,
inter alia, as follows:
“A party seeking to enforce an award in an international commercial arbitration may have a
choice of country in which to do so; as it is sometimes expressed, the party may be able to go
forum shopping. This depends upon the location of the assets of the losing party. Since the
purpose of enforcement proceedings is to try to ensure compliance with an award by the legal
attachment or seizure of the defaulting party’s assets, legal proceedings of some kind are
necessary to obtain title to the assets seized or their proceeds of sale. These legal proceedings
must be taken in the state or states in which the property or other assets of the losing party are
located.”

TIME LIMIT

The 1996 Act does not prescribe any time limit within which a foreign award must be applied to
be enforced. However, various High Courts have held that the period of limitation would be
governed by the residual provision under the Limitation Act 1963 (No 36 of 1963), i.e. the
period would be three years from the date when the right to apply for enforcement accrues.

The High Court of Bombay, in Noy Vallesina v Jindal Drugs Limited, has said that since a
Foreign Award is not a decree per se and requires enforcement by a competent court, its
application would fall within the residuary provisions of the Limitation Act, i.e., the limitation
period will be 3 years.

On the other hand, the High Court of Madras, in Compania Naviera ‘Sodnoc’ v. Bharat
Refineries Ltd, referred to the Foreign Awards as deemed decrees and held that the limitation
period will be 12 years.

COMPARISON WITH DOMESTIC ENFORCEMENT REGIME

There are two fundamental differences between enforcement of a foreign award and a domestic
award.

1) A domestic award does not require any application for enforcement. Once objections (if
any) are rejected, the award is by itself capable of execution as a decree. A foreign award,
however, is required to go through an enforcement procedure. The party seeking
enforcement has to make an application for the said purpose. Once the court is satisfied
 that the foreign award is enforceable, the award becomes a decree of the court and
executable as such.
2) The other difference between the domestic and foreign regime is that (unlike for domestic
awards) there is no provision to set aside a foreign award. In relation to a foreign award,
the Indian courts may only enforce it or refuse to enforce it — they cannot set it aside.
This ‘lacuna’ was sought to be plugged by the Supreme Court in the decision of Venture
Global where the Court held that it is permissible to set aside a foreign award in India
applying the provisions of Sec 34 of Part I of the Act.

CONCLUSION

Arbitration is the most preferred alternative dispute resolution option for people but there is still
much confusion regarding the enforcement of a Foreign Award. A much-needed clarity is
required to establish the trust among the parties choosing Arbitration as the preferred method of
ADR. The only thing that can prevent the establishment of this mistrust is the enactment of
legislation that can fix these loopholes. The amendments coupled with the judgments
pronounced by the Supreme Court of India are a step in the right direction. It will help to provide
a boost to the volume of Arbitration in India.