Enforcement of foreign arbitral award
An arbitral award refers to the decision of an arbitral tribunal, whether in a domestic or international arbitration, including any interim awards thereunder. In India, enforcement and execution of arbitral awards are governed both by the Arbitration and Conciliation Act, 1996 and the Code of Civil Procedure, 1908. This article aims to look at the manner and procedure by which these arbitral awards, which are passed or laid down outside our territorial limits, are enforced in India. The process for the same is one that is mired in complexities and takes a lot of time to be enforced and as shall be seen below, been muddled by judicial decisions on the matter.
Frameworks for enforcement of arbitral awards
The primary framework as regards the enforcement of arbitral awards is the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention. The Convention facilitates the enforcement of arbitral awards in all the contracting states, that is, those nations which are a party to and are signatories to the Convention, one among which is India. Prior to the New York Convention, enforcement of arbitral awards of another country in the jurisdiction of another State was provided for in the Geneva Protocol on Arbitration Clauses, 1924 as well as the Geneva Convention on the Enforcement of Awards of 1927.
The laws of India, as a result of India being a signatory to both the New York as well as the Geneva Conventions, have primarily always provided for enforcement, within the local territory of India, of foreign arbitral awards. Examples of these include the laws such as the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961 which were in tune with the Geneva and New York Convention, in that they provided for enforcement of foreign arbitral awards in India, provided that the parties have consented to the dispute being settled in the as per the law of the place chosen for the proceeding. However, today, the law that is in force is the Arbitration and Conciliation Act of 1996, enacted both on the UNCITRAL Model Law on Arbitration as well as to revamp and replace the 1937 and 1961 laws on the same. Thus, today, it is the 1996 Act that provides for the enforcement of foreign arbitral awards in India.
Further, the Code of Civil Procedure of 1908 does also play in the role in the enforcement of foreign awards in India. The arbitral award has been accorded the status of a decree and thus the procedure that applies to set aside or challenging of a decree applies in equal measure to an arbitral award.
Enforcement of awards under the Arbitration and Conciliation Act, 1996
As the Arbitration and Conciliation Act of 1996 (hereinafter referred to as the ‘Act’), is the prime legislation behind the enforcement of foreign awards, it is essential to understand how the awards are enforced under the Act. One of the declared objectives of the Arbitration and Conciliation Act, 1996 is that every final award is to be enforced in the same manner as the decree of the Indian court would be.
The Act has two parts- Part I and Part II, each of which deal with the enforcement of different type of foreign arbitral awards. Part I, modelled on the UNCITRAL Model Law, provides for the enforcement of arbitral awards that are not covered under the ambit of either the New York or the Geneva Conventions. As laid down by the apex Court, Part I of the Act applies to foreign awards that are governed neither by the New York nor the Geneva Convention. Such enforcement of awards can be challenged in cases wherein the award is contrary to either the fundamental policy or interest of India or is patently illegal.
Part II of the Act is in tune with the provisions of the New York Convention. As per Section 46 of the Act, the provisions of Part II applies if the arbitral award is in pursuance of arbitration agreement under the Convention and the award is made in those States or in within the territorial limits of such place that has been notified by the Government of India. Such recognition of a foreign State is done through means of a notification by the Government of India that arbitral awards in those places are eligible to be enforced in India with respect to the parties to the agreement.
However, there are certain circumstances where even if the agreement is one that is valid as per Indian law and meets the requirements, it shall not be enforced on the following grounds if the Court is satisfied that:-
- Parties to the agreement either are incapable of being parties to the agreement for reasons such as law applicable for the award vis a vis the Indian law.
- Party was not given adequate notice to present his case as regards the arbitration proceedings or the appointment of the arbiter.
- Award deals with matters beyond the scope of the arbitration agreement.
- Composition of the Arbitral Authority or Procedure was not in conformity with the agreement of the parties or the law of the land where the arbitration took place.
- Award is not binding on the parties or has been set aside by a competent authority where the award was made.
Further, as regards the Geneva Convention. Part II of the Act still contains provisions from the 1937 Act which provide for enforcement of awards under the Geneva Convention, in the same manner, as the New York Convention.
Procedure for enforcement of awards
At the outset, it is upon the losing party to object to the arbitral award and file an application for setting it aside. However, if the objections to the award are not sustained or if no objections are filed within the time limit, the award itself becomes enforceable as a decree of the court.
An award can be challenged and set aside only by way of an application under Section 36 of the Act and only the basis of the circumstances listed under it. An application for setting aside an award must be made within three months of receipt of the award by the applicant subject to a further extension of 30 days on sufficient cause being shown. An application beyond this period is time-barred and further delay cannot be condoned. The party, after the expiry of the time for setting aside the arbitral award, as mentioned above, can file an application for execution before the court of the competent jurisdiction for the enforcement of the arbitral award
The different types of awards which are enforceable include Money Award, Award Containing Injunction and a Declaratory Award.
For the purposes of the Arbitration and Conciliation Act, 1996, ‘court’ means the principal Civil Court having original jurisdiction to decide the question forming the subject matter of the arbitration if the same were a subject matter of a suit. The aggrieved party can, thus, bring its application to set aside the award before the court where the successful party has its office or where the cause of action in whole or in part arose or where the arbitration took place.
Any application filed under Section 34 of the Act for setting aside the award must be made within 3 months from receipt of the same. This period can be extended by the court by a further period of 30 days on a sufficient cause being shown, but not thereafter. The court normally allows a wide scope to the meaning of what constitutes ‘sufficient cause’ and if it is convinced of the genuineness of the delay in filing an, the delay is condoned.
Format of application filed before the court
An application is filed before the court of the competent jurisdiction seeking enforceability and execution of the award. The application should state all the important facts and issues framed by the arbitral tribunal and findings of the arbitral tribunal. The claim as awarded should be mentioned and specifically the extent to which the award for enforcement id sought. The documents required for the same, include the original award or authenticated copy of the award as well as an original or duly certified copy of the original arbitration agreement.
At this juncture, it must be understood that although there exists a procedure for the enforcement of foreign arbitral awards in India, such is not a smooth and efficient one and has come in for severe criticism. One of the main criticisms is the fact that it is not at all possible to be enforced in a quick and speedy manner as the Act stipulates that the award can be enforced only once the time available for the Court to strike down the award has passed. This is extremely inconvenient and one that leads to inordinate delays in the enforcement of arbitration agreements as concerns Indian Parties. Further, the significant role that the Courts play in what is essentially an alternative to the traditional judicial system is also a bone of contention for many.
To conclude, it can be stated that the Indian Legal System does indeed have a well laid down and established the procedure for the enforcement of foreign awards in India. However, there is a rising need to reform the same in order to make it more business-friendly and lessen the burden on our already overworked judiciary.