Law > Civil Laws > Alternate Dispute Resolution > Foreign Awards (Sections 44 to 60 of the Arbitration and Conciliation Act)
Arbitration is a procedure in which parties submit present or future disputes, to one or more arbitrators (arbitral tribunal) who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court. The decision given by the arbitral tribunal is called an arbitration award. In this article, we shall study foreign award.
An arbitration award is an instrument embodying the decision of the arbitral tribunal, given after determination in a quasi-judicial manner of matters in dispute between two or more contending parties, referred in pursuance of a valid written arbitration agreement between them providing for such reference giving arbitrators the power to decide and imposing a duty which makes it incumbent upon the parties to obey the decision arising from the submission.
Domestic Award:
The order passed by an Arbitral Tribunal in arbitrations seated in India will be deemed to be an order of the court and will be enforceable under the provisions of CPC, as if it were an order of the court, which provides clarity on its enforceability. Once the arbitral award is final and valid, the award holder shall file an application for execution of the award against the award debtor before the commercial court or commercial division of the High Court, subject to jurisdiction. In the mean-time, in the event, the arbitral award is being challenged, the court reserves the power to provide injunctive relief and grant a stay on the execution of the arbitral award. It is pertinent to note that pursuant to the amendment to the Act in 2015, the party challenging an arbitral award would have to move a separate application in order to seek a stay on the execution of the particular arbitral award. It may be noted that if a court finds the award to be enforceable in nature, at the stage of execution, there can be no challenge as to the validity of the arbitral award.
Foreign Award:
Part II of the Act deals with foreign awards based on New York and Geneva conventions. An arbitral award is said to be a foreign award if it has a foreign element in it or has one or more of the following factors:
- If the award is made in a foreign country.
- If the subject matter of the arbitration agreement involves international transaction that is it is related to international trade, commerce, investment, etc.
- Where a tleast one of the parties to arbitration agreement is a foreign national
- If the award is made in accordance with the foreign law.
The New York Convention defines “foreign award” 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
As per the Geneva Convention, “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
India is the signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 as well as the Geneva Convention on the Execution of Foreign Arbitral Awards, 1927.
If a party receives a binding award from a country which is a signatory to the New York Convention or the Geneva Convention and the award is made in a territory which has been notified as a convention country by India, the award would then be enforceable in India. The enforcement of a foreign award in India is a two-stage process which is initiated by filing an execution petition. Initially, a court would determine whether the award adhered to the requirements of the Act. Once an award is found to be enforceable it may be enforced like a decree of that court. However, at this stage parties would have to be mindful of the various challenges that may arise such as objections taken by the opposite party, and requirements such as filing original/ authenticated copy of the award and the underlying agreement before the court.
Enforcement of Foreign Award:
In order to enforce a foreign arbitral award, section 47 of the Act mandates that the following documents to be produced before the appropriate court:
- Original award or a duly authenticated copy in the manner required by the country where it is made.
- Original agreement or duly certified copy.
- Evidence necessary to prove the award is a foreign award, wherever applicable.
New York Convention:
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done in New York, 10 June 1958 (the New York Convention), is described as the most successful treaty in private international law. It is adhered to by more than 160 nations. Sections 44 to 52 of the Arbitration and Conciliation (Amendment) Act, 2015 deals with foreign awards passed under the New York Convention.
In its simplest terms, the Convention incorporated two radical principles which, at that time, revolutionised the resolution of disputes with international elements, namely, enforcement of arbitration agreements and enforcement of foreign arbitral awards. Whilst the former provision upholds the principle of party autonomy by requiring national courts to refer the parties to arbitration, the latter incorporates a system of recognition of foreign arbitral awards in States bound by the Convention subject to limited exceptions. Furthermore, the Convention establishes a minimum legal framework, but it permits national courts to enforce arbitral awards under higher standards than those included in its provisions.
Two pre-requisites for enforcement of foreign awards under the New York Convention. These are:
- The country must be a signatory to the New York Convention.
- The award shall be made in the territory of another contracting state which is a reciprocating territory and notified as such by the Central Government.
Geneva Convention:
Sections 53-60 of the Arbitration and Conciliation (Amendment) Act, 2015 contains provisions relating to foreign awards passed under the Geneva Convention. The conditions for enforcement of foreign awards under the Geneva Convention are provided under Section 57 of the Arbitration and Conciliation Act, 1996. These are as follows:
- the award has been made in pursuance of a submission to arbitration which is valid under the law applicable thereto;
- the subject-matter of the award is capable of settlement by arbitration under the law of India;
- 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 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;
- the enforcement of the award is not contrary to the public policy or the law of India.
Convention Award:
Convention awards may be described as that category of foreign awards to which either of the two New York or Geneva Convention apply. Under the Arbitration and Conciliation (Amendment) Act, 2015. There are two avenues available for the enforcement of foreign awards in India, viz., the New York Convention and the Geneva Convention, as the case may be.
The New York Convention defines “foreign award” 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
As per the Geneva Convention, “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
Foreign Awards When Binding:
According to section 46 of the Act, “Any foreign award which would be enforceable under Chapter I of Part II 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.”
Article III of the New York Convention enjoins upon each contracting State to recognize arbitral award as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the articles under the Convention.
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