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Introduction
The recognition and enforcement of foreign arbitral awards form a significant practice area in the present economic climate that features cross-border trading thriving everywhere. India having adhered to both New York and Geneva Conventions made an important place in her domestic jurisprudence via Arbitration and Conciliation Act 1996. However, after many significant advancements made in the national attitude, which was arbitration friendly, several issues at practical level prevail still. The present paper discusses the methodology and legal framework of the enforcement of foreign arbitral awards in the Indian context along with problems encountered and recommendations for change. While India claims to respect the best traditions of international arbitration, enforcement remains hampered by unnecessary delay and judicial interpretation variations.
Although the statute provides for an all-encompassing structure, its working application will significantly vary and hence become confusing for the foreign investors. The same expansive approach to public policy exceptions has been used as a sword for attacking the arbitral award; thereby making its enforcement even more formidable. For these problems to be solved, processes should be streamlined, arbitration panels designed, and interpretation of public policy exceptions made even narrower. Improvement in arbitration law education for judges and legal practitioners will lead to increasing quality in judicial decisions. Therefore, it is likely that it will create a better predictability and stability of the arbitration climate to position India as an even more attractive country for international arbitration
Foreign arbitral awards are those judgments rendered in a jurisdiction other than the one where its enforcement is sought. Such awards are recognized internationally and are codified under specific legal enforcement procedures. They are covered under several legal statutes, special regulations, and international treaties to facilitate international recognition and application. In India, the term “foreign award” has been defined under Section 44 of the Arbitration and Conciliation Act of 1996.
The term “foreign arbitral awards” particularly refers to awards made through arbitration carried out outside one’s domicile jurisdiction, as opposed to domestic arbitration. In the legal case of Serajuddin and Co. v. Michael Golodetz and Others (1959), the Calcutta High Court explained the essential constraints and scenarios surrounding the term “foreign arbitration.” The court defined specific requirements that define an arbitration as foreign. According to this judgment, arbitration will be deemed foreign if:
The arbitral awards can be implemented into two different types of awards: domestic awards that are governed by Section 36 of Part I of the Arbitration and Conciliation Act of 1996, and foreign arbitral awards that are recognized and enforced through two principal frameworks: the New York Convention, as provided under Chapter I of Part II of the Arbitration and Conciliation Act of 1996, and the Geneva Convention, as set forth in Chapter II of Part II. The following provisions ensure compliance and use of awards to international arbitration, within the limits of the caps and reciprocal conditions agreed upon to relevant treaties. II of the Arbitration and Conciliation Act of 1996 (“Act”) prescribes the procedure for enforcing international awards.
There are two stages of enforcement of a foreign award in India:
In the case of an award subject to New York Convention, Section 47 of the Arbitration Act stipulates that it is a requirement for the party holding the award to present before the court:
This, by and large, applies to the executing of a Geneva Convention order under Section 56 of the Arbitration Act.
Time-limit for filing application for enforcement: There is no time bar prescribed by the Arbitration Act to file an application to enforce a foreign judgment.
However, Section 43 of the Arbitration Act also declares that the Limitation Act of 1963 or Limitation Act governs arbitrations. Further, the Limitation Act is silent on how foreign awards are to be enforced, and the Supreme Court observed that the residuary provision in Article 137 of the Limitation Act prescribes the limitation in time for bringing proceedings for the enforcement of a foreign award. Thus, the limitation period shall run for three years from the time the right to apply accrues.
Sections 48 and 57 of Arbitration Act offer grounds for challenging a New York Convention award and a Geneva Convention award respectively. Accordingly, if any of the circumstances referred to in sections 48 or 57 of the Arbitration Act (as the case may be) are satisfied, a party against whom a foreign award is made may object to its enforcement. The grounds of resisting arbitration are dealt with in paragraph 19 of this paper. However, it needs to be said that a court exercising has discretion in the carrying out of the order of enforcement in case one or more of the grounds as provided under sections 48 or 57 of the Arbitration Act exist. The court will treat it as a decree of that court and execute the foreign award once it holds that the foreign award is capable of enforcement.
Can the enforcement court set aside a foreign award? The enforcing court may “decline” to enforce a foreign judgment; however, it cannot set aside the award even if the facts in sections 48 or 57 of the Arbitration Act are present. Only the court of the seat of arbitration can set aside a foreign award because that court has supervisory or primary jurisdiction over that arbitration.
Scope of Refusal:
Section 48 provides for limited grounds upon which Indian courts can refuse to enforce foreign arbitral awards. Courts cannot go into the merits of the case, thus ensuring minimal interference.
Key Provisions Post-2015 Amendment:
Arbitrable matters:
According to Booz-Allen (2011) and Ayyasamy (2016), there are the following types of cases that are not arbitrable: criminal offence, matrimonial cause, guardianship, insolvency, probate, tenancy and intellectual property disputes.
Public Policy (Section 48(2)(b))
Public policy refusal grounds were clarified in Renu Sagar (1993), which specified that:
It was further clarified in Shri Lal Mahal (2013), which restricted public policy to the Indian domestic understanding, and the 2015 Amendment further sharpened its application.
Notable Cases:
The amendments attempt to limit the enforcement refusals strictly and strive to make India’s arbitration framework more acceptable in the international field.
Section 57 of the Geneva Convention sets the conditions for the enforcement of an international arbitral award. The award can be refused if any of the conditions set under Section 57(1) on arbitration are not met.
According to Section 57(2), the court has the discretion to set aside the recognition of foreign awards of arbitration even if the requirements contained in Subsection (1) are met if it finds that the party applying for the recognition was not given adequate notice of the arbitration so that they were unable to make their case or if they did not receive appropriate representation because of lack of legal capacity; the award fails to determine the matters which the parties agreed to refer to arbitration; or the award makes findings with respect to matters which are not referred to arbitration.
The judgment pronounced in the case of Se Se Oil v. Gorakhram Gokalchand (1960) holds that Sections 57(1) and 57(2) enumerate the requirements that must be satisfied for foreign arbitral awards to be enforced in India. The onus of proof for such requirements is on the party to whom the international arbitral awards are sought to be made. Section 57(3) also gives discretionary powers to the judiciary to withhold enforcing awards of international arbitration, which reasons are mentioned there, while at the same time also considering the objections presented by the party before whom it is attempted to enforce the award.
The Madras High Court in the decision Società Anonima Lucchesse Olli E. Vini Lucca v. Gorakharam Gokalchand (1963) held, “An award made under that clause by the tribunal should not be supported in respect of an illegal contract.”.
A lot of barriers are faced by India in enforcing international arbitral awards. In M/S Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. (2001), the court held that foreign awards, if qualified as a decree, were enforceable under the Limitation Act’s Article 136 within the period of 12 years. However, the ball is set rolling by the judgment in Bank of Baroda v. Kotak Mahindra Bank (2020), where it has been held that Article 137, which prescribes a limitation period of three years, applies to international decrees passed by foreign tribunals. Such a judgment has caused a degree of confusion as to whether the lesser limitation period would apply to international arbitral awards styled as decrees.
The frequent failure of India’s legal system to deliver expeditious decisions aggravates the problem of judicial delay. The vagueness caused by the wide and arbitrary use of public policy grounds has only increased uncertainty, notwithstanding recent attempts to limit their operation. Moreover, the enforceability of the ruling is usually burdened by the creditor, especially the complex ones, and the inadequacy of courts committed to arbitration may also limit their proper handling. All these factors create heavy challenges towards the timely and reliable enforcement of international arbitration awards within India.
Recommendations for Improvement
The introduction of time-bound processes for enforcement applications would bring more efficiency in the disposal of the arbitration process. Additionally, the establishment of arbitration benches with the High Courts would provide focus on arbitration matters, bringing greater expertise and consistency in judicial decisions. Through a narrower and more uniform application of the exceptions, it can be assured to promote an arbitration environment that is more predictable and stable in its application. The capacity building can also be enhanced through training judges and practitioners in arbitration law that will enhance the general quality of judicial decisions and deepen the appreciation of arbitration principles and practices. Altogether, these can be useful in creating a more potent and reliable arbitration framework.
This results in India agreeing to place itself in line with international arbitration standards. Enforcement of foreign arbitral awards still remains a task, and such delays shall most probably decrease with the judicial interpretation becoming uniform also. India is well-suited to adopt the finest global practices. Continued reforms of this nature shall be making India a preferred jurisdiction to cross-border disputes.
Therefore, enforcement of foreign arbitral awards becomes quite an important affair for settling cross border international disputes and to encourage international business transactions. It reflects will of India to honour the international conventions and legal instruments for allowing parties from other countries to seek resolution for their dispute in an effective manner within time. The legal basis for recognition and enforcement of foreign arbitration awards in India also draws from the Arbitration and Conciliation Act 1996 alongside the New York and Geneva Conventions. That will also make the very process steps streamlined. This procedural framework, limitations, and in line with the developments which have happened lately have been highly significant to keep and act for somebody or an organization proceeding on international arbitration.
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