Enforcement of Foreign Arbitral Awards in India

Abstract

The enforcement of foreign arbitral awards is a critical component of international dispute

resolution and plays a pivotal role in promoting cross-border commerce and investment. This
research paper has examined the legal framework governing the enforcement of foreign
arbitral awards, with a particular focus on the Indian context. The key provisions of the
Arbitration and Conciliation Act, 1996, and the country's commitment to the New York
Convention, which collectively provide a robust system for recognizing and enforcing foreign
arbitral awards in India has been explored. An emphasize also has been laid on the case laws
which has expanded the scope for challenging foreign arbitral awards and the new ground
that is a judicial creation.

Introduction

India globalized its economy in 1992 which resulted in expansion of international trade. As a
result of the expansion, there has been multiple contractual and legal relationships being
formed for commercial purposes. Anywhere a relationship of commercial nature exists there
arises disputes which results in parties approaching the traditional Courts to arrive at a
solution. However, Indian Courts have been flooded with backlogs of cases and this causes
the cases to be drawn out for a long period, sometimes forever. Therefore, there has been an
increase in the trend of alternative dispute resolution mechanisms and one of the most
popular forms is arbitration.

Arbitration is the method of resolving disputes in a confidential and amicable manner by a

neutral third party whose decision is binding. International disputes are often settled by
arbitration as these are fast and reliable, confidential and neutral. It allows the parties to
freely choose the legal system to be applied in the arbitration, reducing the complication
arising from differing national laws.

Arbitration in India is governed by the Arbitration and Conciliation Act which was enacted in
1996. Prior to the Act, the Arbitration was governed by three statutes namely, Indian
Arbitration Act, 1940; Arbitration (Protocol & Convention) Act, 1937; and Foreign Awards
(Recognition & Enforcement) Act, 1961 which was enacted to implement the New York
Convention.
Arbitration & Conciliation Act, 1996

The 1996 Act was introduced to consolidate the law in terms of the UNCITRAL Model Law
and Rules.1 Part 1 of the Act applies to arbitration conducted in India and award as a result of
such arbitration in India. Part 2 applies to enforcement of foreign arbitral awards as per the
New York Convention and Geneva Convention. Unlike the 1961 Act, the 1996 Act makes it
clear that the character of an award is determined by the place where it is made. 2

“Foreign Arbitral Award has been defined as an arbitral award on differences between
persons arising out of legal relationships, whether contractual or not, considered as
commercial under the law in force in India, made on or after the 11th day of October 1960 -

(a) in pursuance of an agreement in writing for arbitration to which the Convention set forth
in the First Schedule applies, and

(b) in one of such territories as the Central Government, being satisfied that reciprocal
provisions have been made may, by notification in the Official Gazette, declare to be
territories to which the said Convention applies.”3

Thus, to be designated as a foreign award under Section 44 of the Arbitration and

Conciliation Act, 1996,

i. The dispute must be commercial dispute under the law in India.

ii. It must be made in pursuance to a written arbitration agreement.
iii. It must be disputes arising between persons.
iv. The arbitration must be conducted in a country which is a signatory to the New
York Convention.4

Commercial dispute has been widely interpreted by the Supreme Court. “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. The second requirement is
more significant and that is that the country where the award has been issued must be a
country notified by the Indian government to be a country to which the New York Convention

1
Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd., (2006) 11 SCC 245.
2
Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd., (2006) 11 SCC 245.
3
Arbitration & Conciliation Act, 1996, § 44.
4
PASL Wind Solutions Private Ltd. v. GE Power Conversion India Private Ltd., (2021) 4 MLJ 59 (SC).
applies.”5 Therefore, awards rendered in only the countries notified by the Indian government
are enforceable and recognized as foreign awards in India.

There are fundamental differences between enforcement of a domestic and foreign award.
The former does not require any application for enforcement. However, a foreign award has
to go through the enforcement procedure which begins with an application for enforcement in
the Indian Courts by initiation of an execution petition. If the court is satisfied with the
foreign award and is enforceable, it becomes a decree of the court. Further, a foreign award
cannot be set aside. The court can either enforce or refuse to enforce the award.

Once the court decides that the foreign award is enforceable, it can proceed to take further
effective steps for execution of the same. There is no requirement of making the foreign
award a rule of court/decree again.6 To enforce a foreign arbitral award, it is essential under
the Arbitration & Conciliation Act, 1996 that:

i. Commercial Transaction
The award must be given in a commercial dispute and in a country which is party
to the convention. The Supreme Court observed that the term "commercial"
should be liberally construed as having regard to manifold activities which are an
integral part of international trade.7
ii. Written Agreement
The agreement need not be in a particular format or formal in language. Although,
the Geneva and New York Convention mandates that the foreign arbitral
agreement is to be made in writing.
iii. Valid Agreement
Arbitration clause cannot be enforceable if the underlying agreement is declared
illegal.8 Thus, the foreign award can be enforceable only if arises from a valid
commercial agreement.
iv. Clear and Unambiguous Award
The courts must give effect to an award that is clear, unambiguous and capable of
resolution under Indian law.9

5
RM Investment Trading Co. Pvt Ltd. v. Boeing Co. & Anr., AIR 1994 SC 1136.
6
Wireless Developers Inc. v. India Games Ltd., 2012 (2) ARBLR 397 (BOM).
7
RM Investment Trading Co. Pvt Ltd. v. Boeing Co. & Anr., AIR 1994 SC 1136.
8
Khardah Co. v. Raymon & Co., AIR 1962 SC 1810.
9
Koch Navigation v. Hindustan Petroleum Corp., AIR 1989 SC 218
“A party applying for enforcement of a foreign award in India must at the time of filing of the
application produce before the court the following evidence:

(a) the original award or a copy thereof, duly authenticated in the manner required by the
law of the country in which it was made;
(b) the original agreement for arbitration or a duly certified thereof; and
(c) such evidence as may be necessary to prove that the award is a foreign award.”10

The Act also provides for the production of English translated, certified to be correct by a
diplomatic or consular agent of the country to which the party belongs to. When a party
moves an application for enforcement of an award, it is their responsibility to prove that the
award is a legitimate "foreign award" based on a foreign agreement for arbitration. The
documents mentioned above will serve as prima facie evidence of the award's legitimacy, and
the party seeking enforcement of the award need not provide any additional proof.11

Challenging Foreign Awards

The conditions for the enforcement of foreign arbitral awards is laid down in Section 48 of
the Arbitration & Conciliation Act, 1996. It provides that the court can refuse a foreign award
if the party against whom it is invoked furnishes proof that satisfies any of the 5 conditions
laid down in Section 44 (1) of the Act. It can also be refused by the court if the subject matter
is not capable of settlement by arbitration in India or the enforcement of the award would be
against public policy.12 A party requesting the court to refuse the enforcement of foreign
award will be entitled to lead evidence which can be either oral or documentary in support of
the grounds.13

In Renu Sagar Power Co. v. General Electrical Corporation 14, the Supreme Court construed
the expression ‘public policy’ in relation to foreign awards as follows: “This would mean that
‘public policy’ in § 7 (1) (b) (ii) of the Foreign Awards Act has been used in narrower sense
and in order to attract to bar of public policy the enforcement of the award must invoke
something more than the violation of the law of India ... Applying the said criteria it must be
held that the enforcement of a foreign award would be refused on the ground that it is

10
Arbitration & Conciliation Act, 1996, § 47.
11
Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain (India) Co., 2008 (4) ARBLR 497 (Delhi).
12
Arbitration & Conciliation Act, 1996, § 48 (2).
13
Ittgrani Spa v. Shivnath Rai, MANU/DE/1130/2005.
14
Renu Sagar Power Co. v. General Electrical Corporation, (1994) Supp (1) SCC 644.
contrary to public policy if such enforcement would be contrary to fundamental policy or
interests or justice or morality of India.”

In Bhatia International v. Bulk Trading 15, the court applied Part I of the Arbitration &
Conciliation Act, 1996. It was held that a petition to set aside a foreign award under § 34 of
the Act would lie with the with the party challenging the award. In the case, the property was
situated in India and thus, Indian law would apply for the execution of the award. Hence, the
award should be validated by the public policy threshold even though it is an offshore award.
The ambit of ‘public policy’ in § 34 of the Arbitration & Conciliation Act, 1996 was
expanded to mean that anything opposed to Indian law. 16 Thus foreign awards under Part II of
the Arbitration & Conciliation Act, 1996 can be challenged by a wider ambit than the New
York Convention that is § 34 of the Act.

“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.”17 The Supreme Court has accepted that the enforcement proceedings should be in
the place where the property of the losing party is situated.18

Enforcement of Foreign Arbitral Awards in Other Countries

United States of America

The proceedings for enforcement of foreign arbitral awards in the US Courts have two steps
i.e. “recognition” which is a process to convert the award into a judgment, and
“confirmation” which is a process of collecting the award debtor’s assets by the award
creditor.19 To enforce a foreign commercial arbitral award in the U.S. courts (assuming the
15
Bhatia International v. Bulk Trading, 2002 (4) SCC 105.
16
Oil & Natural Gas Corp. v. Saw Pipes Ltd., 2003 (5) SCC 705.
17
Redfern and Hunter on Law and Practice of International Commercial Arbitration (Sweet and Maxwell, First
Edition, 1986).
18
Brace Transport Corporation of Monrovia v. Orient Middle East Lines Ltd., 1995 Supp (2) SCC 280.
19
How do I enforce my international arbitration award in the U.S.?, MOLOLAMKEN LLP,
https://www.mololamken.com/knowledge-how-do-i-enforce-my-international-arbitration#:~:text=There%20is
%20no%20specialized%20court,award%2Ddebtor%27s%20assets%20are%20located.
losing party is subject to the jurisdiction of the U.S. courts), an award holder need only
present an authentic copy of the award to the court, at which point it will be recognized and
enforced unless the losing party can establish a basis for nonrecognition under Article V of
the New York Convention. Article V allows recognition to be declined if (i) the arbitration
agreement was invalid; (ii) the losing party was not properly notified of the arbitral
proceedings; (iii) the award “deals with a difference not contemplated by or not falling within
the terms of the submission to arbitration, or it contains decisions on matters beyond the
scope of the submission to arbitration”; (iv) the tribunal composition was improper; (v) the
award “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;” (vi) the “subject matter” of the dispute is not
“capable of settlement by arbitration” under that country’s law; or (vii) award enforcement
would be contrary to “public policy.”20

United Kingdom

Conclusion

In conclusion, the enforcement of foreign arbitral awards in India and globally is a vital
element of the rule of law, international commerce, and diplomacy. As nations continue to
engage in international trade and investment, the effectiveness and reliability of this system
will be pivotal in maintaining trust and fostering economic growth across borders. It is
essential for governments, legal practitioners, and businesses to work together to ensure the
efficient and equitable enforcement of foreign arbitral awards, ultimately contributing to a
more harmonious and prosperous global community. In the broader context, the enforcement
of foreign arbitral awards is a subject of global significance, as it reflects the principles of
comity and reciprocity that underpin international cooperation and trade. The New York
Convention, as a cornerstone of this system, has facilitated the enforcement of awards in over
160 countries, providing a reliable framework for resolving cross-border disputes.
Additionally, this paper has delved into the challenges and issues that may arise in the
enforcement process, including considerations related to public policy and the role of Indian
courts in supervising and supporting the arbitration process. Through case studies and a
20
Timothy G. Nelson, Enforcing International Arbitration Awards: US Courts Achieve Prompt and Efficient
Enforcement, With Safeguards, SKADDEN’S 2020 INSIGHTS (Jan 21, 2020),
https://www.skadden.com/insights/publications/2020/01/2020-insights/enforcing-international-arbitration-
awards.
comparative analysis, we have gained insights into the practical application of these legal
provisions.

While India has made significant strides in promoting arbitration as a reliable method for
resolving international disputes, there remain areas of potential improvement, such as
enhancing efficiency and reducing delays in enforcement proceedings. This underscores the
importance of ongoing legislative and institutional reforms to further strengthen India's
position as an arbitration-friendly jurisdiction.