Enforceability of Foreign Judgement and Arbitral Awards

This Article is written by MIHIKA MADAN, a law student at Gitarattan International Business School, Delhi during her internship at Le Droit India.

Introduction

Arbitration is a legal process for resolving disputes without going to court, where a neutral third party called an arbitrator gives a final and binding judgement which is known as arbitral award or simply, award. This is equivalent to court’s judgement. Arbitration has been statutorily recognized under the Arbitration and Conciliation Act of 1996.

The Arbitration and Conciliation Act of 1996 also recognises Foreign Arbitral Awards and provides the provision for its enforcement in India.

The Arbitration and Conciliation Act of 1996 was created with the guidance of the Model Law on International Commercial Arbitration by the United Nations Commission on International Trade Law (UNCITRAL).

Key Words

Arbitration, Foreign Judgement, Arbitral Award, New York Convention, Geneva Convention, Enforcement.

Types of Arbitration

There are various types of arbitration depending upon the nationality of the parties, the arbitral award or the arbitrators involved. They are as follows:

Ad Hoc Arbitration

Ad hoc arbitration is the type of arbitration where the parties mutually agree to resolve their disputes by arbitration proceedings conducted by mutually appointed arbitrators but not by an institution. This is one of the most common forms of arbitration in India.

Institutional Arbitration

Institutional Arbitration is the form of arbitration where an institute, which has been set up for the purpose of settling disputes by arbitration or other ADR methods, is employed to conduct arbitration. Such institutes may be national or international in character and they usually lay down their own rules of arbitration. But such rules cannot override the provisions of the Arbitration and Conciliation Act, 1996. These institutes maintain a panel of arbitrators from which arbitrators are recommended to the parties. Example – International Court of Arbitration.

Domestic Arbitration

When the arbitration takes place in one jurisdiction and both the parties come under that jurisdiction, then such an arbitration is called domestic arbitration. In other words, both the parties must be nationals of the same jurisdiction as that of the seat of arbitration or in case of body corporates, they must be incorporated under the same jurisdiction as that of the seat of arbitration. Example: when the seat of arbitration is in India to resolve a dispute between two Indian companies, then it is a domestic arbitration.

International Arbitration

International arbitration is the type of arbitration where at least one of the parties at dispute is a foreign national or in the case of a body corporate or an association or body of individuals has been incorporated in a foreign country. Then such an arbitration is construed as international arbitration. Section 2 (1) (f) of the Arbitration and Conciliation Act, 1996 defines it.

Arbitration Agreement

Section 2(1)(b) of the Arbitration and Conciliation Act, 1996 defines arbitration agreement. It is a written agreement between the parties whereby both the parties have agreed to resolve their dispute by arbitration instead of litigation.

Essentials of Arbitration Agreement

• The contract must be in writing.
• The reference to the arbitration clause should be separately mentioned in the contract.
• The reference to the arbitration clause must be in clear and unambiguous terms.
• The arbitration clause should be well framed, signifying the intention of the parties to resort to arbitration, so that in cases of disputes under the contract, such clause can be made applicable.
• The arbitration clause should not be repugnant to any other terms of the contract.
• Whether the arbitration agreement is an independent agreement or a composite agreement, it is important that the arbitration clause should be severable from the rest of the agreement or contract. This ensures that the arbitration agreement survives if the main agreement gets terminated or invalidated. 
• In case the arbitration agreement is an independent agreement, it must fulfill all the essential mentioned in Section 10 of Indian Contract Act, 1872.

Arbitral Award

The judgement or order of the arbitral tribunal is called the arbitral award. Section 2(1)(c) of the Arbitration and Conciliation Act, 1996 defines arbitral award.

The arbitral award must be duly written, signed by the arbitrator(s) and dated with proper mention of the place of arbitration. The arbitral award must contain due reasons for the granting of such an order unless the parties have waived the necessity of a reasoned decision. An arbitral award is binding on the parties just like a judgement of the court.

Any party within thirty days of receipt of the award may request the tribunal to correct any errors in the award and if all the parties so wish, can even ask for interpretation of a specific part or portion of the arbitral award.

After the time has expired to make an application for setting aside of the arbitral award. In the case where, no such dismissal or stay order has been granted by the court, then the arbitral award in a domestic arbitration shall become enforceable.

Foreign Arbitral Award

Foreign arbitral award is the award granted by an arbitration tribunal recognized by the New York Convention and Geneva Convention. A foreign arbitral award is enforceable under Part II of the Arbitration and Conciliation Act, 1996.

Conditions for enforcement of foreign arbitral award are mentioned below:

• The arbitral award is granted in matters considered to be commercial matters by laws in force in India because India has adopted the commercial reservation under the New York Convention and the Geneva Convention.
• The arbitral award must be granted in pursuance of an arbitral agreement that comes under the ambit of the New York Convention and the Geneva Convention.
• The arbitral award should be granted in relation to parties where at least one person is subject to the jurisdiction of a territory duly notified in the Official Gazette by the Indian government and passed in one such notified territory.
• The award must be final in nature to become enforceable in India, and such award will be deemed to be final when no proceedings challenging the award are pending or ongoing in that foreign country.
• The foreign arbitral award must not be against the public policy in India.
• The foreign award must be an arbitrable subject matter in India.
• The foreign award must not have been set aside or suspended by competent authorities in the foreign country.
• The executing court for a foreign award may be a High Court which has jurisdiction over the territory in which the award debtor’s assets are situated or where a suit for the recovery of money can be filed.
• In order to enforce a foreign award, the enforcing party must duly submit before the executing court the following:

• The original or authenticated copy of the arbitral award.
• The original or certified copy of the arbitration agreement.
• Evidence demonstrating that the arbitral award is a foreign award.

New York Convention

 The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) is an international treaty that facilitates the enforcement of foreign arbitral awards across the world. India is a signatory to this convention, which is incorporated into Indian law through the Arbitration and Conciliation Act, 1996. The enforcement of foreign awards under the New York Convention is covered in Chapter I, Part II of the Arbitration and Conciliation Act of 1996, under Sections 44 to 52.

Essentials for Enforcement of Foreign Arbitral Awards

• The original award or an authenticated copy.
• The original arbitration award or its certified copy.
• Any evidence of the foreign nature of the award.

Geneva Convention 

The Geneva Convention on the Execution of Foreign Arbitral Awards (1927) is an international treaty that facilitates the recognition and enforcement of foreign arbitral awards. India is a signatory to this convention as well, and it is incorporated into the Arbitration and Conciliation Act, 1996. However, the New York Convention is more widely recognized globally, and the Geneva Convention is largely considered superseded by the New York Convention in modern practice.

The enforcement of foreign arbitral awards under Geneva Convention is covered in Chapter II, Part II of the Arbitration and Conciliation Act of 1996, under Sections 53 to 60.

UNCITRAL Arbitration Rules

UNCITRAL Arbitration Rules are a set of rules based procedural framework of arbitration rules that parties, either as a part of their contract or after a dispute occurs, can use to govern their arbitration proceedings. UNCITRAL Arbitration Rules are flexible in nature as they allow the parties to mutually modify the rules to specifically suit their needs. The UNCITRAL Arbitration Rules were originally adopted way back in 1976 by the United Nations General Assembly but were last modified in 2013.

Challenging Enforcement of Foreign Awards in India

Grounds of refusal of enforcement of foreign arbitral awards in India:

• The parties to the arbitration agreement are not competent.
• The arbitration agreement is invalid.
• The party challenging the award did not receive proper notice of the arbitrator’s appointment or the arbitration proceedings.
• The award has been suspended or set aside by a competent authority.
• Implementing the award would be contrary to India’s public policy.
• The specific time limit for the enforcement of a foreign arbitral award has expired.

Limitation period for enforcement of foreign arbitral awards

The decision in M/S Fuerst Day Lawson Ltd v. Jindal Exports Ltd. (2001) cleared the air that the foreign award holds the status of a decree itself and hence is capable of enforcement. Under the Limitation Act, Article 136 of the Schedule applies to the enforcement of decrees, with the limitation period being 12 years from the date of the decree.

In the case of Bank of Baroda v. Kotak Mahindra Bank (2020), it was ruled that for foreign decrees (which are issued by foreign courts) to be enforced, Article 136 does not apply; instead, Article 137 is applicable (it is the residuary provision which says that when no other limitation is prescribed limitation of 3 years will apply).

Relevant Case Laws:

Government of India v. Vedanta Ltd & Others (2020): The decision in this case emphasises the significant pro-enforcement trend, urging the courts not to refrain from enforcing the arbitral awards.

• In NAFED v. Alimenta S.A. (2020), the Supreme Court ruled that for a foreign award to be unenforceable, it must pertain to a transaction that would have violated Indian laws, and was therefore in contradiction to the public policy of India. 
• In the case of Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. (2011), it was held by the Supreme Court that once a foreign award is deemed enforceable, there is no requirement to make the foreign arbitral  awards a rule of the court.
• In the landmark case of Bhatia International v. Bulk Trading S.A. & Another (2002),  the Supreme Court held that those awards which are not made in the Convention country cannot be recognised as a foreign arbitral award, and to enforce an award in a non-Convention country, a separate action has to be filed. Thus, it was held that all those awards that are not made in the Convention country are to be enforced by the process of filing another suit on the set grounds.
• The Supreme Court in R. Viswanathan v. Rukn-Ul-Mulk Syed Abdul Wajid (1962) observed that if the court fails to fulfil the minimum requirements of natural justice or if the foreign court was under coercion while issuing the judgment, so, in such conditions, the court can refuse to enforce the foreign arbitral awards.
• In Serajuddin & Co. v. Michael Golodetz (1959), the Calcutta High Court clarified that the expression “foreign arbitration” includes arbitrations conducted in countries that are not a party to the Geneva Convention, and the awards resulting from such arbitrations would also be considered to be enforceable.

Conclusion

The enforcement of foreign judgments and arbitral awards in India plays a crucial role in ensuring the effectiveness of cross-border dispute resolution and international commercial relationships. India’s legal framework, governed by the Arbitration and Conciliation Act, 1996, is designed to promote the recognition and enforcement of foreign decisions while maintaining safeguards to protect fundamental legal principles.

In the case of foreign arbitral awards, India adheres to international conventions, including the New York Convention (1958) and the Geneva Convention (1927), which are embedded within the Arbitration and Conciliation Act. The Indian judiciary has adopted a pro-arbitration stance, limiting its interference in arbitral proceedings and foreign awards, particularly when reviewing challenges under Section 48 of the Act, where grounds for refusal are narrowly interpreted.

Ultimately, India’s legal regime strikes a balance between honoring international obligations and safeguarding its sovereign interests. As globalization continues to expand, India’s commitment to enforcing foreign judgments and arbitral awards fosters confidence in its legal system, making it a reliable jurisdiction for international trade and arbitration.