Enforcement of Certain Foreign Awards, PDF

CHAPTER 3 ENFORCEMENT OF CERTAIN FOREIGN AWARDS LEARNING OUTCOMES At the end of this chapter, you will be able to understand:  Various Types of Arbitration and Their Features (Ad hoc Arbitration, Inst...

CHAPTER 3 ENFORCEMENT OF CERTAIN FOREIGN AWARDS LEARNING OUTCOMES At the end of this chapter, you will be able to understand:  Various Types of Arbitration and Their Features (Ad hoc Arbitration, Institutional Arbitration, Domestic Arbitration, International Arbitration, Contractual Arbitration, Statutory Arbitration, Fast Track Arbitration, Foreign Arbitration)  Various Types of Arbitral Awards & Their Characteristics (Ad hoc Arbitral Award, Domestic Arbitral Award, International Commercial Award)  Enforcement of Foreign Awards – ♦ New York Convention Awards – Chapter I of Part II of the Arbitration and Conciliation Act, 1996 ♦ Geneva Convention Awards – Chapter II of Part II of the Arbitration and Conciliation Act, 1996 ©The Institute of Chartered Accountants of India  3.2 THE ARBITRATION AND CONCILIATION ACT, 1996 CHAPTER OVERVIEW Ad hoc Arbitration, Institutional Arbitration, Domestic Arbitration, International Arbitration, Types of Arbitration Contractual Arbitration, Statutory Arbitration, Fast Track Arbitration, Foreign Arbitration Enforcement of certain Foreign Awards Ad hoc, Types of Arbitral Domestic, Awards International Commercial New York Convention Awards Enforcement of Foreign Awards Geneva Convention Awards ©The Institute of Chartered Accountants of India  ENFORCEMENT OF CERTAIN FOREIGN AWARDS 3.3. 1. ARBITRATION AND ITS TYPES We have discussed in previous chapters that arbitration is a private, consensual dispute resolution process where parties choose a neutral arbitrator or panel to hear their case. It offers a flexible, efficient alternative to litigation, allowing for expert decision-making. Arbitration awards are legally binding, and the process is widely used for resolving various disputes, especially in international contexts. Ad-hoc Arbitration Contractual Arbitration Institutional Arbitration Statutory Arbitration Types of Arbitration Domestic Arbitration Fast Track Arbitration International Arbitration Foreign Arbitration I) Ad hoc Arbitration Ad-hoc arbitration refers to a type of arbitration where the parties involved in a dispute manage the arbitration process themselves, without the assistance of an established arbitration institution or organization. In ad hoc arbitration, the parties have greater flexibility and autonomy in shaping the procedural rules, selecting arbitrators, and managing the overall arbitration proceedings. Features of Ad hoc Arbitration Selection of Arbitrator Cost Procedural Rules Features of Enforceability Ad hoc Administration Arbitration Expertise of Arbitrator Flexibility Level of Confidentiality ©The Institute of Chartered Accountants of India  3.4 THE ARBITRATION AND CONCILIATION ACT, 1996 a) Selection of Arbitrator: In this type of arbitration, the parties are free to choose their arbitrators. They may agree upon a sole arbitrator, or a panel of arbitrators based on mutual consent. b) Procedural Rules: The parties are responsible for determining the procedural rules that will govern the arbitration. They have the flexibility to tailor the process to their specific needs, subject to any mandatory legal requirements. c) Administration: Ad hoc arbitration requires the parties to handle administrative tasks themselves. This includes setting hearing dates, managing document exchange, and coordinating communication. d) Flexibility: Flexibility is the main feature of Ad hoc arbitration. The parties can adapt the procedure as per the complexity and nature of the dispute. This flexibility is particularly valuable when dealing with unique or industry-specific issues. e) Cost: Ad hoc arbitration is cost-effective compared to institutional arbitration because the parties do not incur administrative fees charged by arbitration institutions. However, parties should be mindful of the potential administrative burden and costs associated with self- management. f) Enforceability: The arbitral award issued in ad hoc arbitration is typically as enforceable as an award from institutional arbitration. The enforceability is governed by national and international laws, such as the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. g) Expertise of Arbitrator: The parties can choose arbitrators with expertise in the specific subject matter of the dispute. This allows for a more tailored and specialized approach to dispute resolution. h) Level of Confidentiality: Ad hoc arbitration proceedings often offer a high level of confidentiality because the parties have greater control over the process and can agree on confidentiality provisions. In simple words, ad hoc arbitration provides parties with a high degree of control and flexibility. It may be more suitable for parties who are familiar with arbitration procedures or have legal representation experienced in managing arbitrations independently. Despite the flexibility, parties should ensure that their ad hoc arbitration agreements are well-drafted to avoid potential pitfalls and disputes over procedural issues. ©The Institute of Chartered Accountants of India  ENFORCEMENT OF CERTAIN FOREIGN AWARDS 3.5. II) Institutional Arbitration Institutional Arbitration is a dispute process where there is a prior agreement between the parties that in case of future differences or disputes arising between the parties during their commercial transactions, such differences or disputes will be settled by arbitration and will be referred to an established arbitration institution or organization. It is to be noted that such arbitration institutions offer procedural guidance, administrative support, and a pool of qualified arbitrators, contributing to a more structured and standardized arbitration process compared to ad hoc arbitration. Features of Institutional Arbitration Administration Impartiality Features of Procedural Rules Institutional Costs and Fees Arbitration Appointment of Arbitrator Confidentiality Support of Institution a) Administration: Institutional arbitration is administered by a specialized arbitration institution. This institution facilitates and administers the arbitration process, providing procedural rules, administrative support, and, in some cases, a roster of arbitrators. b) Procedural Rules: The institution provides a set of rules that govern the arbitration proceedings. Procedural rules help standardize the arbitration process, ensuring a consistent and fair framework for resolving disputes. c) Appointment of Arbitrator: The institution often assists in the appointment of arbitrators. This is done either by providing a list of qualified individuals or through a specific appointment mechanism outlined in its rules. This also ensures the impartial selection of arbitrators, contributing to the perceived fairness of the arbitration process. d) Support of Institution: The institution supports case management, handling administrative tasks such as scheduling hearings, managing communication between parties, and overseeing the submission of documents. The institution also maintains records of the arbitration proceedings, including communications, submissions, and the final award. ©The Institute of Chartered Accountants of India  3.6 THE ARBITRATION AND CONCILIATION ACT, 1996 e) Impartiality: Arbitration institutions are designed to be neutral and impartial, providing a level playing field for all parties involved. Parties often choose institutional arbitration for its credibility. f) Costs and Fees: Costs are on the higher side as compared to ad hoc arbitration. Institutions typically charge fees for their services, including administrative costs and arbitrator fees. g) Preservation of Confidentiality: Institutional arbitration rules often include provisions to preserve the confidentiality of the proceedings. This is especially important for parties who wish to keep the details of their dispute private. In simple words, institutional arbitration offers a structured and efficient dispute resolution process with the support of a recognized arbitration institution. The features provided by these institutions contribute to the reliability, efficiency, and enforceability of the arbitration process. Difference between Ad hoc Arbitration and Institutional Arbitration Basis Ad hoc Arbitration Institutional Arbitration 1. Appointment of Parties have greater flexibility in An external arbitration institution Arbitrator choosing arbitrators and can is involved in the process of directly appoint them without appointment of arbitrators. relying on any external institution. 2. Selection The selection process is typically Arbitrators are selected based on Process outlined in the arbitration appointment rules established by agreement between the parties. Institutions for a more structured and impartial selection process. 3. Rules and Parties have the flexibility to Arbitration institutions provide a Procedures determine the rules and set of established rules and procedures that will govern the procedures that parties must arbitration process. follow. 4. Administration Parties are responsible for The arbitration institution plays a and Support administering the arbitration more active role in administering process, including managing the proceedings including administrative tasks, scheduling managing communication hearings, and ensuring between the parties and the compliance with procedural tribunal and overseeing the requirements. overall process. 5. Arbitration Fees Parties have more control over Arbitration institutions typically arbitration fees as they are charge fees for their services. directly involved in managing the This fees cover administrative ©The Institute of Chartered Accountants of India  ENFORCEMENT OF CERTAIN FOREIGN AWARDS 3.7. arbitration process. However, costs, the appointment of this also means that they bear arbitrators, and other support the responsibility for services. administrative tasks. 6. Arbitration Costs Costs may be lower compared to While institutional arbitration may institutional arbitration, but this involve higher upfront costs these depends on various factors, can be saved in the long run. including the complexity of the case and the efficiency of the process. III) Domestic Arbitration The term “Domestic Arbitration” denotes arbitration which occurs in India. In this type of arbitration, both parties must be Indians and the conflict has to be decided by the substantive law of India. Though Domestic Arbitration has not been defined in the Arbitration and Conciliation Act, 1996, however when reading Section 2(2) with 2(7) of the Act 1996 together, it can be construed that domestic arbitration means an arbitration in which the arbitral proceedings must necessarily be held in India, and according to Indian substantive and procedural law. Features of Domestic Arbitration Rules and Regulations Awards Flexibility in Procedure Confidentiality Features of Domestic Arbitration Agreement Arbitration Cost Effectiveness Selection of Arbitrator Expertise of Arbitrator Powers of Tribunal Informal Process a) Rules and Regulations: Domestic arbitration is typically governed by the laws of the country or jurisdiction where the arbitration is taking place. India arbitration laws or statutes outline the procedures and rules for conducting Indian domestic arbitrations. ©The Institute of Chartered Accountants of India  3.8 THE ARBITRATION AND CONCILIATION ACT, 1996 b) Flexibility in Procedure: Parties in a domestic arbitration have significant autonomy and flexibility in determining the procedures and rules that will govern the arbitration process. They are free to choose the arbitrators, establish the arbitration agreement, and define the scope of the arbitration. c) Arbitration Agreement: A valid arbitration agreement is a main requirement for domestic arbitration. This agreement specifies their intent to resolve disputes through arbitration rather than through traditional litigation. d) Selection of Arbitrator: In domestic arbitration, parties are free to select their arbitrators. The number of arbitrators, their qualifications, and the method of appointment are typically outlined in the arbitration agreement or agreed upon by the parties. e) Powers of Tribunal: In domestic arbitration, the arbitral tribunal has the authority to make decisions on procedural matters, consider evidence, and render a final award. Generally, the arbitration agreement and applicable national laws determine the scope of the tribunal's powers. f) Awards: Domestic arbitration awards are generally enforceable in the same way as court judgments within the jurisdiction. National laws may govern the recognition and enforcement of domestic arbitration awards. g) Confidentiality: Confidentiality is a common feature of domestic arbitration. Generally, parties prefer the private nature of arbitration proceedings and many arbitration laws include provisions that protect the confidentiality of the arbitration process and the related documents. h) Cost Effectiveness: Domestic arbitration is often chosen for its perceived cost- effectiveness and efficiency compared to traditional litigation. Parties may avoid lengthy court proceedings and the arbitration process can be decided according to the specific needs of the parties. i) Expertise of Arbitrator: Parties can select an arbitrator who is an expert in the subject matter of the dispute. This allows for a more informed and specialized decision-making process, particularly beneficial when the dispute involves technical or industry-specific issues. j) Informal Process: Domestic arbitration proceedings are generally less formal than court proceedings. This informality and flexibility contribute to a more accelerated and adaptable dispute resolution process. ©The Institute of Chartered Accountants of India  ENFORCEMENT OF CERTAIN FOREIGN AWARDS 3.9. IV) International Arbitration Where at least one of the parties involved is domiciled or resident outside India or the subject matter of the dispute is related to place outside, such arbitration is treated as International Arbitration. In other words, international arbitration is a method of resolving disputes between parties from different countries or involving cross-border transactions. Features of International Arbitration Parties Selection of Arbitrator Arbitration agreement Features of Confidentiality International Arbitration Impartial Forum Cultural Sensitivity Autonomy Witnesses of Experts Ad hoc or Institutional Limited Grounds for Cost – Effective Challenge a) Parties: International arbitration involves parties from different countries or transactions with an international dimension, necessitating a neutral forum for dispute resolution. b) Arbitration agreement: It requires a valid arbitration agreement specifying the intent to resolve disputes through arbitration, which is generally included in international contracts. c) Impartial Forum: It provides a neutral and impartial forum, allowing parties to avoid potential biases associated with national courts. d) Autonomy: International arbitration allows parties under dispute to choose the governing law for the substance of the dispute, providing flexibility and predictability in the resolution process. e) Ad hoc or Institutional: It can be conducted through ad hoc arbitration or institutional arbitration with established rules. ©The Institute of Chartered Accountants of India  3.10 THE ARBITRATION AND CONCILIATION ACT, 1996 f) Selection of Arbitrator: In international arbitration, parties are free to select arbitrators with international expertise. Generally, they are chosen for their familiarity with diverse legal systems and cultural backgrounds. g) Confidentiality: Normally, international arbitration includes confidentiality provisions for safeguarding sensitive business information and maintaining privacy in the resolution process. h) Cultural Sensitivity: Due importance is given to cultural diversity to accommodate different legal traditions and business practices, fostering a more inclusive and acceptable dispute resolution process. i) Witnesses of Experts: In the case of international arbitration, the presentation of expert witnesses is allowed to address technical or industry-specific issues, enhancing the tribunal's understanding of complex matters. j) Limited Grounds for Challenge: Awards in international arbitration are final and binding with limited grounds for challenge, contributing to a more conclusive resolution of disputes. k) Cost–Effective: It offers a potentially cost-effective alternative to litigation, though costs can vary based on factors like complexity and arbitrator fees. Difference between Domestic Arbitration and International Arbitration Basis Domestic Arbitration International Arbitration 1. Geographical Takes place within the borders Involves parties from different Scope of a single country, involving countries or transactions with a parties from the same cross-border dimension. jurisdiction or transactions with purely domestic elements. 2. Rules and Governed by the laws of the Governed by a combination of Regulation country in which the arbitration international conventions and the is conducted including national laws chosen by the parties in the arbitration laws or statutes. arbitration agreement. 3. Arbitration Requires a clear and Similarly requires a valid arbitration Agreement enforceable agreement between agreement but may involve parties to resolve disputes additional considerations. through arbitration. 4. Selection of Parties have more flexibility in Generally, arbitrators with Arbitrator selecting arbitrators and the international expertise are chosen process may be outlined in the for their familiarity with diverse legal arbitration agreement. systems and cultural backgrounds. ©The Institute of Chartered Accountants of India  ENFORCEMENT OF CERTAIN FOREIGN AWARDS 3.11. 5. Procedural The parties have significant It can be conducted through ad hoc Rules autonomy in determining the arbitration or institutional arbitration procedural rules, evidence with established rules. submission, and other aspects of the arbitration process. 6. Enforceability Awards are enforceable within Awards are generally enforceable of Awards the jurisdiction where the across borders under international arbitration took place subject to conventions providing a global the national laws governing enforcement mechanism. arbitration. 7. Cultural Involves a more homogeneous Recognizes and accommodates Diversity legal and cultural context within diverse legal traditions, cultural the boundaries of a single norms, and business practices, country. requiring a more flexible and adaptable approach. V) Contractual Arbitration In modern times, the growth of commercial activities and transactions gives rise to frequent occasions for differences and disputes between the parties which need early and satisfactory solutions. For this purpose, the parties choose to incorporate an arbitration clause as a part of the agreement to refer to their future differences and disputes. This is called contractual arbitration. Features of Contractual Arbitration Arbitration Clause Confidentiality Enforceability of Arbitration Freedom of Parties Features of Awards Contractual Arbitration Selection of Arbitrator Speedy Resolution Rules of Arbitration Procedural Flexibility a) Arbitration Clause: In such type of arbitration, parties include an arbitration clause or agreement in their contract, which indicates their mutual consent to resolve disputes through arbitration. ©The Institute of Chartered Accountants of India  3.12 THE ARBITRATION AND CONCILIATION ACT, 1996 b) Freedom of Parties: The parties are free to add the arbitration clause in their agreement according to their specific needs, specifying details such as the number of arbitrators, arbitration rules, and the place of arbitration. c) Selection of Arbitrator: The parties are also free to select the arbitrator according to the expertise required as per the subject matter of the contract. d) Rules of Arbitration: The parties may choose ad hoc procedural rules or may establish rules provided by different arbitration institutions. e) Confidentiality: The arbitration agreement may include provisions to maintain the level of confidentiality for the sensitive information obtained during arbitration proceedings. f) Enforceability of Arbitration Awards: Arbitration awards arising from arbitration are enforceable in the same way as the judgments of the court. g) Speedy Resolution: Generally, the arbitration clause is added in the agreement for the early and speedy resolution of differences and disputes. h) Procedural Flexibility: In such arbitration, parties have the flexibility to design the arbitration process according to requirements in the subject matter. VI) Statutory Arbitration It is mandatory arbitration imposed by the operation of law on parties. Parties have no option but to abide by the law of the land. It is different from other types of arbitration because in such type of arbitration consent of parties is not required. It is binding on the parties. Example: Section 43(c) of The Indian Trust Act, 1882 provides to deal the dispute to arbitration. Features of Statutory Arbitration a) Basis of Law: This arbitration is based on specific legislation and laws. These laws determine the procedures, rules, and other requirements of arbitration for certain types of distribution. b) Requirements: Requirements for a valid arbitration agreement are decided by statutory provisions. It may include language required for an arbitration agreement, a form of notice, etc. c) Types of disputes: Statutory provisions of law determine the type of disputes to which these provisions will apply. ©The Institute of Chartered Accountants of India  ENFORCEMENT OF CERTAIN FOREIGN AWARDS 3.13. d) Selection of Arbitrator: Statutory arbitration laws may determine the required qualifications for the arbitrator. Laws may also provide the formal mechanism for the selection and appointment of arbitrators. e) Requirement of specific expertise: In some cases, statutory arbitration may provide for special expertise relevant to the specific subject matter for being an arbitrator. f) Confidentiality: Some statutory provisions may include provisions to maintain the level of confidentiality for the sensitive information obtained during arbitration proceedings. g) Cost–Effective: Generally, statutory arbitration is designed to provide a cost-effective and efficient alternative dispute resolution to court litigation. Difference between Contractual Arbitration and Statutory Arbitration Basis Contractual Arbitration Statutory Arbitration 1. Authority The authority is derived from the Authority is mandated by specific agreement between the parties. statutory laws. 2. Arbitration An arbitration agreement includes No such clause is included in the Clause an arbitration clause to refer the arbitration agreement. The dispute to arbitration. requirement of arbitration is imposed by law. 3. Selection of The parties are also free to select Statutory arbitration laws may Arbitrator the arbitrator according to the determine the required expertise required as per the qualifications for arbitrators. Laws subject matter of the contract. may also provide the formal mechanism for the selection and appointment of arbitrators. 4. Enforceability Arbitral awards are enforceable Awards are enforceable as of Award based on the agreement of the mandated by the relevant statutes. parties. 5. Procedural Procedural rules are flexible as Procedural rules are prescribed by Rule per the agreement between the specific statutory laws. parties. VII) Fast Track Arbitration Section 29B of the Arbitration and Conciliation (Amendment) Act, 2015 provides that the parties to an arbitration agreement may agree in writing to have their dispute resolved by the fast-track procedure. It generally deals with trade-related matters. It is a time-bound device to resolve the dispute within six months. ©The Institute of Chartered Accountants of India  3.14 THE ARBITRATION AND CONCILIATION ACT, 1996 Features of Fast Track Arbitration Accelerated Process Short Timing Process Limited Requirement of Cost Effective documents Features of Fast Track Arbitration Simple Procedure Arbitration Award Selection of Arbitrator Flexibility Limited Number of Hearings a) Accelerated Process: This process of arbitration is faster and more efficient as compared to the regular arbitration process. This process emphasizes on early resolution of disputes. b) Limited Requirement of documents: For early resolution of dispute, this process of arbitration may restrict the requirement of the entire document by focusing on the key documents and information relevant to the subject matter. c) Simple Procedure: Fast-track arbitration is a simplified procedure. This includes a more focused discovery process and shorter hearings. d) Limited Number of Hearings: The number and duration of hearings are generally reduced in fast-track arbitration. This process involves limiting witness testimony and expert presentations to essential matters. e) Selection of Arbitrator: In the selection of an arbitrator in fast-track arbitral proceedings, priorities are always given to individuals with experience in handling expedited cases. f) Short Timing Process: The timeline for fast-track arbitration is compressed compared to standard arbitration. g) Cost Effective: One of the goals of fast-track arbitration is to reduce the overall cost of the arbitration process. This can be achieved through a combination of limited discovery, shorter timelines, and a simplified procedural structure. ©The Institute of Chartered Accountants of India  ENFORCEMENT OF CERTAIN FOREIGN AWARDS 3.15. h) Arbitration Award: Arbitration awards in fast-track proceedings are intended to be final and binding. The limited grounds for challenging awards in this process contribute to the efficiency and finality of the process. i) Flexibility: While fast-track arbitration follows an accelerated framework, there is still some flexibility. Parties may agree on specific procedures or modify the process to suit the particular needs of their dispute. (VIII) Foreign Arbitration When the arbitration proceedings are conducted in a place outside India, it is called “foreign arbitration”. In such type of arbitration, a “foreign award” is sought. 2. TYPES OF ARBITRAL AWARDS (AD HOC, DOMESTIC AND INTERNATIONAL COMMERCIAL AWARDS) (I) Ad hoc Arbitral Awards Ad hoc arbitral awards refer to arbitration awards that are issued in ad hoc arbitrations. Ad hoc arbitral awards arise from arbitration proceedings where the parties manage and organize the process themselves without the involvement of a specific arbitration institution. The effectiveness of ad hoc arbitration depends on the willingness of the parties to cooperate and adhere to the agreed-upon procedures. (II) Domestic Arbitral Awards Domestic arbitral awards are issued in the context of arbitration proceedings where the dispute is resolved within the borders of a single country. The arbitration process is subject to the laws and regulations of the specific country where the arbitration takes place, and the awards are enforceable within that jurisdiction. Domestic arbitral awards play a crucial role in the realm of dispute resolution, offering parties a forum to efficiently resolve their conflicts within the confines of a single country's legal system. The arbitration proceedings and the resulting award are governed by the domestic laws of the country where the arbitration takes place. This feature ensures that the legal principles, rules, and procedures applied are consistent with the domestic legal system, providing a familiar and enforceable framework. Domestic arbitral awards are subject to the enforcement mechanisms provided by the domestic legal system. Recognition and enforcement may also be facilitated by international conventions, with many countries adhering to the principles outlined in the New York Convention. ©The Institute of Chartered Accountants of India  3.16 THE ARBITRATION AND CONCILIATION ACT, 1996 (III) International Commercial Awards International commercial arbitral awards are issued in the context of arbitration involving parties from different countries, often related to international business transactions. International commercial arbitration is a widely used method for resolving disputes arising from international business transactions. Instead of resorting to national courts, parties involved in cross-border transactions often choose arbitration as a means of resolving their disputes, and the resulting awards are termed international commercial awards. Features and Characteristics Applicable Law Procedural Rules Features and Arbitration Agreement Characteristics of International Cost and Time Effectiveness Commercial Appointment of Arbitrator Awards Confidentiality Enforcement a) Applicable Law: The legal framework governing international commercial arbitral awards is often international rather than solely based on the laws of one country. The parties usually agree on the governing law for their contract and arbitration agreement. The arbitration proceedings and the resulting award are then based on this agreed-upon legal framework. b) Arbitration Agreement: Similar to domestic arbitration, parties typically include an arbitration clause or agreement in their international commercial contracts, specifying that any disputes arising from the contract will be resolved through arbitration. The arbitration agreement outlines key details such as the number of arbitrators, the arbitration rules to be followed, and the seat of arbitration. c) Appointment of Arbitrator: In international commercial arbitration, the appointment of arbitrators is often a crucial aspect. Parties often seek arbitrators with diverse backgrounds and expertise. Institutions like the International Chamber of Commerce (ICC) or the London Court of International Arbitration (LCIA) may play a role in arbitrator appointments, ensuring a level of neutrality and expertise. ©The Institute of Chartered Accountants of India  ENFORCEMENT OF CERTAIN FOREIGN AWARDS 3.17. d) Enforcement: The recognition and enforcement of international commercial awards are facilitated by international conventions such as the New York Convention. This convention provides a framework for the enforcement of arbitral awards in over 160 countries, streamlining the enforcement process. The enforceability of international commercial arbitral awards across borders adds a layer of certainty and reliability to the resolution process. e) Arbitral Procedural Rules: International commercial arbitration allows for flexibility in procedural matters, catering to the unique aspects of each dispute. Procedural rules may be determined by the chosen arbitration institution or agreed upon by the parties, striking a balance between formality and efficiency. f) Cost and Time Effectiveness: While international commercial arbitration may be costlier than domestic arbitration, it is often considered more cost-effective than litigating in multiple national courts. The efficiency of the arbitration process contributes to a timely resolution of disputes, crucial in the fast-paced world of global business. g) Confidentiality: Confidentiality is often a significant concern in international commercial arbitration. International commercial arbitration strikes a balance between the transparency required for fairness and the confidentiality desired by businesses. Confidentiality provisions may be outlined in institutional rules or agreed upon by the parties, safeguarding sensitive commercial information. 3. ENFORCEMENT OF FOREIGN AWARDS Chapter I of Part II of Arbitration and Conciliation Act 1996 with headings “Enforcement of Certain Foreign Awards” and “New York Convention Awards” respectively were enacted to incorporate the Foreign Awards (Recognition and Enforcement) Act, 1961 with certain modifications. Some of them were as under: a) Section 45 of Arbitration and Conciliation Act, 1996 modifies the provisions of section 3 of the 1961 Act i.e. to stay of proceedings in respect of matters to be referred to arbitration. b) Section 49 of the Arbitration and Conciliation Act, 1996 regarding enforcement of the foreign awards were introduced while sections 4(1), section 5, and Section 6 of the 1961 Act were omitted. c) Section 50 of the Arbitration and Conciliation Act, 1996 was introduced to deal with the matters relating to appeals against certain orders made under section 45 and section 48. ©The Institute of Chartered Accountants of India  3.18 THE ARBITRATION AND CONCILIATION ACT, 1996 In the same way, Chapter II was enacted for certain modification in the Arbitration (Protocol and Convention) Act, of 1937. Some of them are as below: a) Section 54 of Arbitration and Conciliation Act, 1996 modifies the provisions of section 3 of the 1937 Act i.e. to stay of proceedings in respect of matters to be referred to arbitration. b) Section 58 of the Arbitration and Conciliation Act, 1996 regarding enforcement of foreign awards was introduced while sections 4(1), section 5, and section 6 of the 1937 Act were omitted. c) Section 59 of the Arbitration and Conciliation Act, 1996 was introduced to deal with the matters relating to appeals against certain orders made under section 54 and section 57. New York Convention Awards – Chapter I of Part II of the Arbitration and Conciliation Act, 1996 Definition Section 44 – In this Chapter, unless the context otherwise requires, "foreign award" means 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. Section 44 of the Arbitration and Conciliation Act, 1996 is based on Article I of the New York Convention and Section 2 of the 1961 Act. Accordingly, the term “foreign award” means the award made as a result of the foreign arbitration which is not a domestic arbitration. The Calcutta HC in the case of Serajuddin Vs. Michael Golodetz held the essential elements for a “foreign arbitration”: i) arbitration should be held in a foreign country by the foreign arbitrator, ii) application of foreign laws, iii) foreign nationals are involved as a party. It was observed by the Supreme Court in case of NTPC Vs. Singer Company that an interim ©The Institute of Chartered Accountants of India  ENFORCEMENT OF CERTAIN FOREIGN AWARDS 3.19. award was made in London in an arbitration agreement governed by the Indian Laws. The SC held in this case that such an arbitral award cannot be considered a foreign award and it is purely a “domestic award” which is governed by Indian Laws. Power of Judicial Authority to Refer Parties to Arbitration Section 45 – Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it prima facie finds that the said agreement is null and void, inoperative or incapable of being performed. Section 45 of Arbitration and Conciliation Act, 1996 is based on Article II (3) of the New York Convention and Section 3 of the 1961 Act. Section 45 provides that the judicial authority may refer the parties to arbitration at the request of one of the parties or any person claiming through or under him. But before referring the parties to arbitration, the judicial authority has to make sure that the arbitration agreement is valid, operative, and capable of being performed. The SC observed in the case of Renusagar Power Co Ltd. Vs. General Electric Company that the expression “shall” used in section 45, denotes that the judicial authority must refer the parties to arbitration if conditions mentioned in the arbitration agreement are satisfied. But the court cannot refer the parties to arbitration suo-moto except where the court is competent to proceed with the case. Further, in the case of Goyal MG Gases Ltd. Vs. Griesheim GMBH, the court held that section 45 provides clearly and apparently that judicial authority when seized of an action in a matter in respect of which the parties have agreed on the nature as provided to in section 44, shall, refer the parties to arbitration at the request of one of the parties or any person claiming through or under him. When foreign award-binding Section 46 – Any foreign award which would be enforceable under this Chapter shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India and any references in this Chapter to enforcing a foreign award shall be construed as including references to relying on an award. Section 46 of the Arbitration and Conciliation Act, 1996 is based on Article III of the New York Convention and Section 4(2) of the 1961 Act. Section 46 addresses the enforceability of foreign ©The Institute of Chartered Accountants of India  3.20 THE ARBITRATION AND CONCILIATION ACT, 1996 arbitral awards. According to the section, any foreign award under this chapter becomes enforceable in India and shall be binding on the parties between whom it was made. These parties may rely on such foreign award by way of defense, set off, or otherwise in any legal proceedings initiated in India. Evidence Section 47 – (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 under sub-section (1) is in a foreign language, the party seeking to enforce the award shall produce a translation into English certified as correct by a diplomatic or consular agent of the country to which that party belongs or certified as correct in such other manner as may be sufficient according to the law in force in India. [Explanation.—In this section and in the sections following in this Chapter, "Court" means the High Court having original jurisdiction to decide the questions forming the subject-matter of the arbitral award if the same had been the subject-matter of a suit on its original civil jurisdiction and in other cases, in the High Court having jurisdiction to hear appeals from decrees of courts subordinate to such High Court.] Section 47 of the Arbitration and Conciliation Act, 1996 is enacted parallel to Article IV of the New York Convention and on the pattern of Section 8 of the 1961 Act. Section 47 of the Arbitration and Conciliation Act, 1996 deals with the specific conditions required to be fulfilled by parties for enforcement of a foreign award. In other words, section 47 prescribes the evidence that the party has to be made prima facie before the court for enforcement of a foreign award. On analysis of section 47(1), it can be said that the following documentary evidence must be produced by the parties before the court while filing the application for the enforcement of a foreign award: a) Original award or a copy thereof which must be authenticated as per the law of the country in which it was made, b) The original agreement for arbitration or a duly certified copy arbitration agreement, ©The Institute of Chartered Accountants of India  ENFORCEMENT OF CERTAIN FOREIGN AWARDS 3.21. c) Such evidence as may be necessary to show that the award is a foreign award. The court may allow the party to fulfill the above conditions even during the proceedings. Further, sub-section 2 provides that if such an award or arbitration agreement is in a foreign language, it should be translated into English and translated copies should be produced. It is to be noted that these copies must be certified by a diplomatic or consular agent of the country to which that party belongs or certified as correct in such manner as may be sufficient according to the law in force in India. Regarding the phrase “at the time of the application” given in section 47(1) of the Act, whether the conditions mentioned in clauses (a) to (c) of section 47(1) should be fulfilled only at the time of application or these can be fulfilled even after the application i.e. during the proceedings. Following the opinion of several commentators and foreign courts, the phrase should be adhered to two strictly and the party should be permitted to fulfill the conditions even during proceedings. It was held by the Supreme Court in the case of M/s Fuerst Day Lawson Ltd. Vs. Jindal Exports Ltd. that a foreign award given after the commencement of the Arbitration and Conciliation Act, 1996 can be enforced only under this 1996 Act even arbitral proceedings might have been commenced before the commencement of 1996 Act. Condition for enforcement of foreign awards Section 48 – (1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the Court proof that— (a) the parties to the agreement referred to in section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (c) 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: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters ©The Institute of Chartered Accountants of India  3.22 THE ARBITRATION AND CONCILIATION ACT, 1996 submitted to arbitration may be enforced; or (d) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or (e) the award has not yet become binding on the parties, or 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. (2) Enforcement of an arbitral award may also be refused if the Court finds that— (a) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or (b) the enforcement of the award would be contrary to the public policy of India. Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,— i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or ii) it is in contravention with the fundamental policy of Indian law; or iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. (3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the Court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security. Section 48 of the Arbitration and Conciliation Act, 1996 is based on Article V of the New York Convention and Section 7 of the 1961 Act. It provides the conditions for enforcement of foreign awards. On analysis of section 48(1), the enforcement of a foreign award may be refused on the request of the party against whom this foreign award is made but party has to prove any of the conditions mentioned in clauses (a) to (e) below: a) If the parties, to the arbitration agreement made under section 44, are under some incapacity or ©The Institute of Chartered Accountants of India  ENFORCEMENT OF CERTAIN FOREIGN AWARDS 3.23.  If the arbitration agreement is not valid under the law to which the parties have subjected it or  If the arbitration agreement is contrary to the law of the country where the award was made. b) If the aggrieved party against whom award is made, was not given:  proper notice of the appointment of arbitrator or arbitral proceedings, or  proper opportunity to present his case. In fact, clause (b) is based on the principle of natural justice and if a foreign award is made in violation of this principle cannot be enforced. c) Foreign award must deal only with the questions actually submitted to arbitral tribunal by the parties. Award must be refused for being enforced if it contains decision on the matters beyond the scope of arbitration agreement. d) According to clause (d), foreign award cannot be enforced:  If the composition of the arbitral authority is not according to arbitration agreement; or  If the arbitral procedure adopted is not in accordance with the agreement; or  If arbitration agreement itself, is contrary to the law of the country where the arbitration took place. e) If the award has been set aside or suspended by a competent authority of the concerned country or it has not become binding on the parties. Section 48(2) provides additional grounds for refusal of enforcement of foreign arbitration award. Accordingly, the court may refuse to enforcement:  If the subject-matter of the difference between parties is not capable of settlement by arbitration under the law of India; or  If the enforcement of the foreign award is opposed to the public policy of India. The expression “public policy” was interpreted in explanation 1 attached. Accordingly, an award is in conflict with the public policy of India, only if,—  the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or ©The Institute of Chartered Accountants of India  3.24 THE ARBITRATION AND CONCILIATION ACT, 1996  it is in contravention with the fundamental policy of Indian law; or  it is in conflict with the most basic notions of morality or justice. It is clarified in explanation 2 that the assessment of whether there is a violation of the fundamental policy of Indian law does not involve a revaluation of the merits of the dispute. Section 48(3) provides that where the party has made an application before the court for the setting aside or suspension of the foreign award, the court is empowered to adjourn the decision on the enforcement of the award and may also order the other party to give suitable security. The decision taken in case of Perfint Healthcare Pvt. Ltd. Vs. California Institute of Computer made it obligatory on the party against whom the award is made, to furnish before the court that such award is not enforceable under any ground set out in the section 48. The obligation of party for making the request and furnishing proof for existence of any condition mentioned in sub-section 1 of section 48 before the court was also confirmed in case of Glencore Grain Rotterdam B.V. Vs. Shivnath Rai Harnarain (India). Enforcement of foreign awards Section 49 – Where the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that Court. Section 49 of the Arbitration and Conciliation Act, 1996 is enacted on the basis of Article III of the New York Convention. Section clearly provides that the court not only of the opinion but should be satisfied that the foreign award can be enforced and such award shall be deemed to be decree of the court. The Appealable orders Section 50 – Notwithstanding anything contained in any other law for the time being in force, an appeal shall lie from the order refusing to— (a) refer the parties to arbitration under section 45; (b) enforce a foreign award under section 48 to the Court authorised by law to hear appeals from such order. (2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court. Section 50 of the Arbitration and Conciliation Act, 1996 deals with the kinds of orders which are appealable. Sub–section 1 provides an appeal can be filed against certain orders made under ©The Institute of Chartered Accountants of India  ENFORCEMENT OF CERTAIN FOREIGN AWARDS 3.25. section 45 and section 48. Sub–section 2 provides that no second appeal is possible against such orders. However, right to appeal to Supreme Court as provided in Constitution of India, is not taken away. Saving Section 51 – Nothing in this Chapter shall prejudice any rights which any person would have had of enforcing in India of any award or of availing himself in India of any award if this Chapter had not been enacted. In other words, chapter I do not weaken the rights that any individual would have had to enforce an award in India or to benefit from an award in India if this chapter had not been enacted. Chapter II not to apply Section 52 – Chapter II of this Part shall not apply in relation to foreign awards to which this Chapter applies. In simple words, the foreign awards to which Chapter I of Part II apply, Chapter II of Part II shall not apply in respect of them. Geneva Convention Awards – Chapter II of Part II of the Arbitration and Conciliation Act, 1996 Interpretation Section 53 – In this Chapter "foreign award" means an arbitral award on differences relating to matters considered as commercial under the law in force in India made after the 28th day of July, 1924,— (a) in pursuance of an agreement for arbitration to which the Protocol set forth in the Second Schedule applies, and (b) between persons of whom one is subject to the jurisdiction of someone of such Powers as the Central Government, being satisfied that reciprocal provisions have been made, may, by notification in the Official Gazette, declare to be parties to the Conventions set forth in the Third Schedule, and of whom the other is subject to the jurisdiction of some other of the Powers aforesaid, and (c) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made, may, by like notification, declare to be territories to which the said Convention applies, ©The Institute of Chartered Accountants of India  3.26 THE ARBITRATION AND CONCILIATION ACT, 1996 and for the purposes of this Chapter an award shall not be deemed to be final if any proceedings for the purpose of contesting the validity of the award are pending in the country in which it was made. Section 53 of the Arbitration and Conciliation Act, 1996 is based on Article 1 of Geneva Protocol and Article 1(1) of Geneva Convention and section 2 of 1937 Act. Section 53 provides the meaning of “Foreign Award”. According to it, foreign award is an arbitral award on disputes in respect of matter which has been referred to arbitration as commercial matter under the law in force in India after 28th of July, 1924. According to section 53, the Central Government, by notification in official gazette, has to declare the territories to which Geneva Convention would be applied. If the award is made in such territories which are not the parties to Geneva Convention, provisions of Chapter II will not be applicable. Further, foreign award will not be considered final if any proceeding, in respect of validity of such a foreign award, is pending in the country in which it was made. Power of judicial authority to refer parties to the arbitration Section 54 – Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, on being seized of a dispute regarding a contract made between persons to whom section 53 applies and including and arbitration agreement, whether referring to present or future differences, which is valid under that section and capable of being carried into effect, shall refer the parties on the application of either of them or any person claiming through or under him to the decision of the arbitrators and such reference shall not prejudice the competence of the judicial authority in case the agreement or the arbitration cannot proceed or becomes inoperative. Section 54 is based on Article 4 of the Geneva Protocol. According to section 54, provisions of Part I or in the Code of Civil Procedure, 1908 will not be applied if these are contrary to the provisions of Chapter II of Arbitration and Conciliation Act, 1996. The judicial authority has the power to refer the parties to the decision of the arbitrators if the following conditions are fulfilled: a) There should be a dispute regarding a contract between the persons to section 53 applies, b) The contract must include an arbitration agreement whether referring to present or future differences, c) There must be an application to refer the arbitration by any party to the arbitration agreement or any person claiming through the decision of the arbitrator, d) The judicial authority thinks that agreement or arbitration can proceed and is operative. ©The Institute of Chartered Accountants of India  ENFORCEMENT OF CERTAIN FOREIGN AWARDS 3.27. e) The judicial authority must be satisfied that the arbitration is valid under section 53. It is to be noted that there is no time limit in section 54. It is at the discretion of judicial authority of based on the circumstances of the case. Foreign awards when binding Section 55 – Any foreign award which would be enforceable under this Chapter shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India and any references in this Chapter to enforcing a foreign award shall be construed as including references to relying on an award. Section 55 is based on Article 11(1) of the Geneva Convention and Section 4(2) of The This section provides that a foreign award enforceable under Chapter II will act as a binding force upon the parties against whom it is made. Further, such foreign award shall be considered as a basis for seeking defense, set-off, or otherwise any legal proceedings in India. Evidence Section 56 – (1) The party applying for the enforcement of a foreign award shall, at the time of application produced 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) evidence proving that the award has become final; and (c) such evidence as may be necessary to prove that the conditions mentioned in clauses (a) and (c) of sub-section (1) of section 57 are satisfied. (2) Where any document requiring to be produced under sub-section (1) is in a foreign language, the party seeking to enforce the award shall produce a translation into English certified as correct by a diplomatic or consular agent of the country to which that party belongs or certified as correct in such other manner as may be sufficient according to the law in force in India. [Explanation.—In this section and in the sections following in this Chapter, "Court" means the High Court having original jurisdiction to decide the questions forming the subject-matter of the arbitral award if the same had been the subject-matter of a suit on its original civil jurisdiction and in other ©The Institute of Chartered Accountants of India  3.28 THE ARBITRATION AND CONCILIATION ACT, 1996 cases, in the High Court having jurisdiction to hear appeals from decrees of courts subordinate to such High Court.] Section 56 of the Arbitration and Conciliation Act, 1996 is enacted parallel to Article 4 of the Geneva Convention and on the pattern of Section 8 of the 1937 Act. Section 56 of Arbitration and Conciliation Act, 1996 deals with the specific conditions required to be fulfilled by parties for enforcement of a foreign award. In other words, section 56 prescribes the evidence that the party has to be made prima facie before the court for enforcement of a foreign award. On analysis of section 56(1), it can be said that following documentary evidences must be produced by the parties before the court while filing the application for the enforcement of a foreign award: a) Original award or a copy thereof which must be authenticated as per the law of the country in which it was made, b) The proof that award is final, c) Such evidence as may be necessary to fulfill the conditions mentioned in clauses (a) and (b). The court may allow the party to fulfill above conditions even during the proceedings. Further, sub-section 2 provides that if such award or arbitration agreement is in foreign language, it should be translated in English and translated copies should be produced. It is to be noted that these copies must be certified by a diplomatic or consular agent of the country to which that party belongs or certified as correct in such manner as may be sufficient according to the law in force in India. Conditions for enforcement of foreign awards Section 57 – (1) In order that a foreign award may be enforceable under this Chapter, it shall be necessary that— (a) the award has been made in pursuance of a submission to arbitration which is valid under the law applicable thereto; (b) the subject-matter of the award is capable of settlement by arbitration under the law of India; (c) the award has been made by the arbitral tribunal provided for in the submission to arbitration or constituted in the manner agreed upon by the parties and in conformity with the law governing the arbitration procedure; ©The Institute of Chartered Accountants of India  ENFORCEMENT OF CERTAIN FOREIGN AWARDS 3.29. (d) the award has become final in the country in which it has been made, in the sense that it will not be considered as such if it is open to opposition or appeal or if it is proved that any proceedings for the purpose of contesting the validity of the award are pending; (e) the enforcement of the award is not contrary to the public policy or the law of India. [Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,— (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.] (2) Even if the conditions laid down in sub-section (1) are fulfilled, enforcement of the award shall be refused if the Court is satisfied that— (a) the award has been annulled in the country in which it was made; (b) the party against whom it is sought to use the award was not given notice of the arbitration proceedings in sufficient time to enable him to present his case; or that, being under a legal incapacity, he was not properly represented; (c) the award does not deal with the differences contemplated by or falling within the terms of the submission to arbitration or that it contains decisions on matters beyond the scope of the submission to arbitration. Provided that if the award has not covered all the differences submitted to the arbitral tribunal, the Court may, if it thinks fit, postpone such enforcement or grant it subject to such guarantee as the Court may decide. (3) If the party against whom the award has been made proves that under the law governing the arbitration procedure there is a ground, other than the grounds referred to in clauses (a) and (c) of sub-section (1) and clauses (b) and (c) of sub-section (2) entitling him to contest the validity of the award, the Court may, if it thinks fit, either refuse enforcement of the award or adjourn the consideration thereof, giving such party a reasonable time within which to have the award annulled by the competent Tribunal. ©The Institute of Chartered Accountants of India  3.30 THE ARBITRATION AND CONCILIATION ACT, 1996 Section 57 of the Arbitration and Conciliation Act, 1996 is based on Article 1, Article 2 of the Geneva Convention and Section 7 of the 1937 Act. It provides the conditions for enforcement of foreign awards. On analysis of section 57(1), for the enforcement of a foreign award, the party seeking enforcement has to prove any of the conditions mentioned in clauses (a) to (e) below: a) If the terms submitted to arbitration are invalid or illegal or contrary to the provisions of law in force, the award given by arbitral tribunal will not be enforceable. b) The dispute or difference should be arbitrable under the law of India. c) The award made by arbitral tribunal should be constituted as per the agreed terms between the parties and also in accordance with the law governing the arbitral proceedings. d) The award has become final in the country in which it has been made, unless-  it is open for being opposed or appealed or  it is proved that in respect of the validity of the award any proceedings are pending. e) Award should not be opposed to public policy of India. According to section 57(2), even the conditions mentioned in sub-section (1) the court must refuse the enforcement of foreign award if following conditions are satisfied: a) The award has been invalidated or canceled in the country where it was rendered. b) If the aggrieved party against whom award is made,  was not given sufficient time notice of the arbitral proceedings, or  is being under legal incapacity, he was not properly represented. c) Foreign award must deal only with the questions actually submitted to arbitral tribunal by the parties. Award must be refused for being enforced if it contains decision on the matters beyond the scope of arbitration agreement. However, Court is empowered to postpone the enforcement of a foreign award or may order to provide any guarantee in this regard if such award has not covered all the differences submitted to the arbitral tribunal. Further, section 57(3) empowers the court to refuse the enforcement of the reward or adjourn the enforcement of the award by giving a reasonable time to the party against whom award is made if such party provides and proves extra grounds, other than grounds mentioned in section 57(1)(a), section 57(1)(c), section 57(2)(b) and section 57(2)(c), to oppose the enforcement of foreign award. ©The Institute of Chartered Accountants of India  ENFORCEMENT OF CERTAIN FOREIGN AWARDS 3.31. It was held in case of Societa Anonmina Vs. Gorakharam Gokalchand that if the contract is illegal, the award given by the arbitral tribunal in pursuance of arbitration clause in the contract shall not be enforceable. Enforcement of foreign awards Section 58 – Where the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of the Court. Section 58 of the Arbitration and Conciliation Act, 1996 is enacted on the basis of Article 1(1) of the Geneva Convention. These provisions are also similar to the provisions given in section 49 of this Act. Section clearly provides that the court not only of the opinion but should be satisfied that the foreign award can be enforced and such award shall be deemed to be decree of the court. Appealable orders Section 59 – (1) An appeal shall lie from the order refusing— (a) to refer the parties to arbitration under section 54; and (b) to enforce a foreign award under section 57, to the court authorized by law to hear appeals from such order. (2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court. Section 59 of the Arbitration and Conciliation Act, 1996 deals with the kinds of orders which are appealable. Sub – section 1 provides an appeal can be filed against certain orders made under section 54 and section 57. Sub – section 2 provides that no second appeal is possible against such orders. However, right to appeal to Supreme Court as provided in Constitution of India, is not taken away. Saving Section 60 – Nothing in this Chapter shall prejudice any rights which any person would have had of enforcing in India of any award or of availing himself in India of any award if this Chapter had not been enacted. In other words, chapter II does not weaken the rights that any individual would have had to enforce an award in India or to benefit from an award in India if this chapter had not been enacted. ©The Institute of Chartered Accountants of India  3.32 THE ARBITRATION AND CONCILIATION ACT, 1996 Test Your Knowledge Multiple Choice Questions (MCQs) 1. Mr. Rahul, an entrepreneur, entered into a business partnership with Ms. Saniya to develop and market a new line of eco-friendly products. As the venture progressed, disagreements arose regarding profit distribution and the allocation of responsibilities. In an attempt to resolve the disputes, both parties agreed to opt for ad hoc arbitration without involving any specific institutional rules. The proceedings took place with the ad hoc arbitration agreement and were not subject to any institutional rules. Which of the following statements is true about ad hoc arbitration? (a) It always involves a three-member arbitral tribunal. (b) The procedural rules are predetermined by an institution. (c) It is more cost-effective than institutional arbitration. (d) Less confidentiality as compared to institutional arbitration. 2. There was a dispute between M/s Sara Sara Developers and M/s Ramanna Properties. Although, the parties had never expressed their intention to choose Manchester as the ‘seat’, but, in the absence of any agreement on the question, Manchester was chosen by the arbitrator as the place of arbitration. Except for being the place of arbitration, Manchester had no significant connection with the contract or the parties. The award decided in this case should be considered as: (a) International Award (b) Foreign Award (c) Domestic Award (d) Interim Award 3. A dispute arose between M/s Goyal Glasses & Co. and CA Sumit Jain regarding the payment of his professional fees. CA Sumit Jain filed the case to the local court. M/s Goyal Glasses & Co. requested the court to refer the case to arbitration. (a) Judicial authority cannot refer the case to arbitration. (b) Judicial authority has always to refer the case to arbitration on the request of part. ©The Institute of Chartered Accountants of India  ENFORCEMENT OF CERTAIN FOREIGN AWARDS 3.33. (c) Judicial authority may refer the parties to arbitration at the request of one of the parties only after assuring that the arbitration agreement is valid, operative, and capable of being performed. (d) Once a dispute is referred to court cannot be referred to arbitration. 4. A dispute was referred to arbitration before the commencement of the Arbitration and Conciliation Act 1996 and arbitral proceedings were also commenced before the commencement of this Act. The foreign award was given after the commencement of the Arbitration and Conciliation Act 1996. Under which Act, the award should be enforced? (a) Arbitration and Conciliation Act, 1996 (b) Act subsisting at the time of Commencement of Arbitral Proceedings (c) Act subsisting at the time of reference of dispute to Arbitration (d) Foreign Arbitration Law 5. Mr. Sahil entered into a contract with Mr. Lalit to give his hotel to him on lease for five years at an annual rent of Rs. 1,00,00,000 on the condition that if a gamble house is run in the hotel the annual rent will increase to Rs. 1,25,00,000. The contract also had an arbitration clause for resolving the dispute in the future. Initially, no gambling house was run in the hotel but Mr. Lalit was allowed the gamble only for two days on the occasion of New Year. A dispute arose regarding the amount of rent and was referred to arbitration. The dispute was resolved and submitted to the court for enforcement. (a) The award is enforceable. (b) As the contract regarding running the gambling house is illegal, the award cannot be enforceable. (c) An arbitration award is always enforceable. It does not make adifference even though the contract was illegal. (d) It is the discretion of the court whether the award may be enforceable or not. Answers to the Multiple Choice Questions: 1. (c) 2. (c) 3. (c) 4. (a) 5. (b) ©The Institute of Chartered Accountants of India