Countries are diverse based on their unique social, economic, and political aspects. However, they are interconnected through business. It is because of this that many commercial disputes sometimes surpass national boundaries. In these times where the growth of a country is determined by its economic prosperity and trade relations, dispute resolution mechanisms like Arbitration have become a popular choice for settling global business disputes. Unlike traditional litigation, arbitration is a quick, amicable and efficient mode of conflict resolution. Nonetheless, enforcing international arbitration awards in India can prove to be a complicated endeavor, as it is guided by a plethora of statutes, rules, and legal precedents.
When the entities are engaged in business relations across borders, the last thing they would want is to be stuck in long-drawn legal battles. In business, time plays a crucial role. If the finances are stuck due to litigation, businesses might feel scarcity of money to undertake their core business and growth-related initiatives. Arbitration serves as a private method for resolving conflicts whereby parties’ consent is required to have their disputes resolved by unbiased third-party called the arbitrator, whose ruling (referred to as an award) holds legal weight just like a judgment of the court. A foreign award is a decision made by arbitrators from outside India's jurisdiction. It is a decision made by arbitration panels in international or domestic arbitration proceedings.
The legal rules for arbitration and enforcing foreign awards in India are prescribed under the Arbitration and Conciliation Act of 1996, which is influenced by the UNCITRAL Model Law.
The New York Convention of 1958 helps in making sure that awards from arbitration conducted in other countries are upheld and enforced in a consistent and effective way. India's participation in the Geneva Convention of 1927 also strengthens the legal system for enforcing foreign arbitration awards.
The importance of arbitration as well as foreign awards and the rules governing them is highlighted by various courts in several decisions. These decisions have helped shape India's arbitration laws. In Renusagar Power Plant Co. Ltd. v. General Electric Co. (1994). SC 860, the Supreme Court upheld the implementation of a foreign judgment against an Indian company.
However, in National Agricultural Cooperative Marketing Federation of India (NAFED) v. Alimenta S.A., SC rendered the contract unenforceable due to violation of public policy. Court noted that NAFED was justified in not exporting the commodity as per the contract because doing so would have violated a government order.
Hence, the enforcement of foreign arbitration awards is determined on a case-to-case basis.
According to Section 44 of the act, a "foreign award" refers to a decision made by an arbitrator in a dispute between individuals, whether based on a contract or not, which are considered commercial under Indian law. This award must have been issued on or after October 11, 1960, and meet the following criteria:
(a) It must be the result of a written agreement for arbitration that falls under the Convention listed in the First Schedule.
(b) It must have been issued in a territory designated by the Central Government, which has determined that reciprocal agreements are in place and has officially announced such territories in the Official Gazette as covered by the mentioned Convention.
As per Section 47 of the Act:
(1) The party applying for the enforcement of a foreign award shall, at the time of the application, produce before the court—
(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 copy thereof; and
(c) such evidence as may be necessary to prove that the award is a foreign award.
(2) If the award or agreement to be produced is in a foreign language, the party seeking to enforce the award shall produce a translation into English.
Enforcement can be denied due to incapacity of the parties, lack of proper knowledge or inability to present a case, award covering issues beyond the arbitration agreement, procedural irregularities, or if the award is not binding or has been set aside by the competent authority. Additionally, enforcement may be refused if the subject matter is not arbitrable under Indian law or if enforcement would be against public policy. The term "public policy" includes instances of fraud, violation of Indian law, or conflict with fundamental principles of morality or justice. If an application for setting aside or suspending the award is pending, the court may adjourn the decision on enforcement and may also order security from the party seeking enforcement.
Where the Court is satisfied that the foreign award is enforceable, the award shall be deemed to be a decree of that Court.
It can be said that arbitration as a mode of dispute resolution is always prompted in India. To ensure that people and businesses use this way to get their disputes resolved, laws have been made lenient and validity of the awards have been made final. Even with the existing legal structure and favorable pro-arbitration decisions, individuals looking to enforce foreign awards in India may encounter obstacles.
Some of the common challenges are:
Enforcement of foreign awards play a crucial role in facilitating smooth international trade. The legal system and court rulings have time and again provided necessary support to simplify the process and increase the efficiency of the enforcement, yet certain obstacles remain. To improve the likelihood of successfully enforcing foreign awards in India, it is vital to stay informed about developments, consult with legal experts, and adhere to best practices in international arbitration.