This document is a journal from the law firm Rajani, Singhania & Partners that provides a legal update and overview on the concept of "Seat of Arbitration" in International Commercial Arbitration. It discusses the law governing contracts, arbitration agreements and procedural law. It analyzes the difference between the seat and venue of arbitration, and how identifying the seat is important as it determines the governing law. The document provides an introduction and analysis of these concepts through explanations and a case example.
This document is a journal from the law firm Rajani, Singhania & Partners that provides a legal update and overview on the concept of "Seat of Arbitration" in International Commercial Arbitration. It discusses the law governing contracts, arbitration agreements and procedural law. It analyzes the difference between the seat and venue of arbitration, and how identifying the seat is important as it determines the governing law. The document provides an introduction and analysis of these concepts through explanations and a case example.
This document is a journal from the law firm Rajani, Singhania & Partners that provides a legal update and overview on the concept of "Seat of Arbitration" in International Commercial Arbitration. It discusses the law governing contracts, arbitration agreements and procedural law. It analyzes the difference between the seat and venue of arbitration, and how identifying the seat is important as it determines the governing law. The document provides an introduction and analysis of these concepts through explanations and a case example.
This document is a journal from the law firm Rajani, Singhania & Partners that provides a legal update and overview on the concept of "Seat of Arbitration" in International Commercial Arbitration. It discusses the law governing contracts, arbitration agreements and procedural law. It analyzes the difference between the seat and venue of arbitration, and how identifying the seat is important as it determines the governing law. The document provides an introduction and analysis of these concepts through explanations and a case example.
RSP INDIA INDIA LEGAL UPDATE is a journal of Rajani, Singhania & Partners which offers a legal LEGAL perspective on the new business climate and opportunities in India in keeping with the existing laws, current happenings and events in Corporate India. UPDATE
Dear Readers, In this Issue Welcome to the September 2015 issue of India Legal Update! Seat Of Arbitration
Contributed by: In this issue, we have presented an overview on the concept of " Devesh Juvekar Seat of Arbitration" in International Commercial Arbitration. Dikshat Mehra We have made an attempt to analyse , the law of Contract, law Prem Rajani governing Arbitration, Procedural Law, difference between Seat Disclaimer and Venue of Arbitration and various other such issues involved in International This update only contains a summary/ limited description Commercial Arbitration. of the topic dealt with hereinabove for general We hope you find this issue interesting and informative. information purposes and should not be construed as a We look forward to your suggestions and feedback at info@rsplaw.in legal opinion or be relied upon in absence of specific legal advice. Best Regards,
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Prem Rajani Managing Partner
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Devesh Juvekar devesh.juvekar@rsplaw.in
SEAT OF Dikshat Mehra dikshat.mehra@rsplaw.in LegalSuite ARBITRATION INTRODUCTION In case of an International Commercial Arbitration, at more than a few times, question arises as to what is the law governing the substance of dispute between the parties, the law governing arbitration which includes construction and validity of the Arbitration agreement and the procedure of Arbitration ?
LAW OF CONTRACT The law of a particular country or some other considerations agreed between the parties may govern the rights and obligations arising out of the contract between the parties. If a local law is selected, it is referred to as the governing or proper law of contract. The proper law is determined in accordance with the general principles of the conflict of laws, namely the law chosen by the parties, or in the absence of such choice, the law of the country with which the agreement is most closely connected as inferred from the intention of the parties to the contract depending upon surrounding factors. arbitration like SIAC etc and follow the procedure prescribed by such institution which is different from the law governing the L AW G OV E R N I N G A R B I T R AT I O N A N D arbitration and procedural law of arbitration). PROCEDURAL LAW The law governing the Arbitration has importance because it CONCEPT OF SEAT OF ARBITRATION AND ITS determines the validity, effect and interpretation of the SIGNIFICANCE Arbitration agreement and such law is relied upon by the Ÿ The Seat of Arbitration determines the applicable law arbitrator to determine the scope of his powers and the governing the Arbitration including the procedural aspects. procedure to be followed by the arbitral tribunal (unless the When the parties specify an applicable law for the parties expressly agree to submit themselves to an institutional Arbitration agreement, that law governs the Arbitration
AND VENUE OF ARBITRATION Ÿ The Seat of Arbitration may well be quite independent of the place or the venue where the hearings or other parts of the arbitral process occur or take place. The Seat of Arbitration it is of vital importance, for it is the courts of the Seat that have the supervisory jurisdiction over the arbitral process. agreement including the procedural aspects of Arbitration. Identification of the Seat of Arbitration post Balco has However, if the parties have not specifically chosen the law become one of the most important features of an governing the conduct and procedure of Arbitration, arbitration clause. The selection of the Seat determines the expressly or by necessary implication, the conduct of the law governing the Arbitration procedure and often, more Arbitration will be determined by the law of the place of the importantly, the process and rights relating to enforcement Seat of Arbitration. The regulation of conduct of Arbitration of the arbitration award. and challenge to an award would have to be done by the Ÿ It is not necessary for the Seat of Arbitration and the venue courts of the country in which the Seat of Arbitration is of the Arbitration to be the same. Location and even when located as such Court would be the supervisory court hearings take place during the course of the Arbitration in possessed with the power to annul the award. several different countries, the chosen Seat of Arbitration Ÿ The Supreme Court in its decision given in the case of Bharat will remain unaffected independent of the geographical Aluminium Company Ltd v. Kaiser Aluminium Technical place where the hearings take place. 3 1 Service Inc ("Balco") held that the choice of another Ÿ In the case of Enercon (India) Ltd and Ors v Enercon Gmbh country as the Seat of Arbitration inevitably imports an and Anr before the Hon’ble Supreme Court of India a acceptance that the law of that country relating to the dispute arose for non-delivery of supplies under an conduct and supervision of Arbitrations will apply to the Intellectual Property License Agreement (“IPLA”) proceedings. containing an arbitration clause. The relevant aspects of the Ÿ If the Arbitration agreement is found or held to provide for a arbitration clause in dispute were as under: Seat / place of Arbitration outside India, then even if the Ÿ The governing law of the IPLA was Indian law; the venue contract specifies that the Indian Arbitration Act shall of the arbitration was London; and the provisions of the govern the arbitration proceedings, Indian courts cannot Indian Arbitration and Conciliation Act, 1996 were to exercise supervisory jurisdiction over the Arbitration or the apply. award. Ÿ There was a sequence of proceedings initiated both in India Ÿ However, in the new proposed amendments to the and in England seeking declarations on the validity of the Arbitration and Conciliation Act, 1996 ("Act"), the Law arbitration clause and asking for anti-suit injunctions. When 2 Commission Report ("Report") has recommended that Part the matter was before the Hon’ble Bombay High Court it I of the Act, such as Section 9 (interim relief), Section 27 had concluded that though London was not the Seat of (court assistance for evidence), Section 37(1)(a) (appeal Arbitration, the English Courts would have concurrent able orders), will remain available to parties in a foreign jurisdiction since, venue of arbitration was London. The Seated Arbitration which now has been accepted by the matter then went before the Hon’ble Supreme Court where Union Cabinet. Further, in one of the other amendments the main issue was that assuming that the Seat of suggested in the Report, the definition of Seat would be Arbitration was India, whether the English Courts would have concurrent jurisdiction as the venue of arbitration is in London? 1 (2012) 9 SCC 552 2 246 Law Commission Report 3 SLP (C) No. 10924 of 2013
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Ÿ The Hon’ble Supreme Court of India held that "the express Ÿ The Hon'ble Bombay High Court relying upon the mention in the arbitration clause that London was the judgement passed by Hon'ble Supreme Court in the case of venue of the arbitration could not lead to the inference that TDM Infrastructure Private Limited v UE Development India 5 London was to be the Seat because although London was Private Limited has held that the intention of the termed as the venue, the law governing the substantive legislature would be clear that Indian parties and contract, the law governing the arbitration agreement and Companies incorporated in India should not be permitted the law governing the conduct of the arbitration were to derogate from Indian law which being part of the public chosen to be Indian law and the closest and most real policy of the country and hence cannot chose a foreign Seat connection was with India. Once the Seat was in India, of Arbitration and therefore relying upon the same went Indian Courts would have exclusive supervisory jurisdiction ahead to appoint an Arbitrator in the aforesaid case. and English Courts cannot have concurrent jurisdiction". However, there is also a judgment of Reliance Industries 6 Limited & Anr v Union of India which talks about two indian Two Indian parties whether can choose a parties having a foreign Seated Arbitration. However, the Foreign Seated Arbitration? said judgement finally does not address the said issue. Ÿ The Bombay High Court in the recent case of M/s Addhar There seems to be some uncertainty with respect to the Mercantile Private Limited vs Shree Jagdamba Agrico aforesaid issue as on date. A conclusive finding on the same 4 Exports Pvt Ltd in a section 11 Application under the Act from the Hon'ble Supreme Court of India would be had considered the important issue as to whether two welcome. Indian parties can chose a Foreign Seat of Arbitration?
In our view, while drafting an arbitration clause in a particular contract, especially in case of International Commercial Arbitration; one should keep in mind the following points:- a) Arbitration clause shall clearly provide the composition of the arbitral tribunal, time for appointment and the language of the proceedings;
b) Parties must decide on law governing the arbitration agreement;
c) The procedure rules for conducting Arbitration like SIAC, LCIA etc should be expressly stated ;
d) Parties must expressly agree upon the Seat of the Arbitration and not to use any other words like venue or place interchangeably and
e) In case, the arbitral hearings are to be held at locations other than the Seat of Arbitration, then expressly mention in the contract that the Seat of Arbitration would be the governing law of arbitration and the same will remain impervious even if the hearings happen at various places/locations.
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