This article is written by Faria Abdulla of 2nd Year of B.A. LL.B. Hons.
Abstract
This Article lays primary emphasis on the Objectives of Foreign Arbitration Awards, the importance of Arbitration Awards, clauses under which these Arbitration Awards are held, their enforcement and also jurisdictional issues related to them. And also to understand the various Challenges in the enforcement of such international arbitration awards.
What is Arbitration?
Arbitration is a process of effectively and efficiently solving of disputes. It provides easy resolution of the conflicts and prevents time-consuming court proceedings and lengthy documentation for those who are willing to get timely solutions of their conflicts and disputes. Arbitration has proved to be very effective method for dispute-solving.
And Hence, Foreign Arbitration Awards, were introduced to protect and promote interests of parties who want speedy resolutions through modern methods rather than traditional ones.
These awards proved to be helpful and also promoted the growth of Arbitration agreements in the country.
Keywords: – Arbitration, Foreign Awards, Arbitration & Conciliation Act, Resolution, Disputes, Court-proceedings,
According to Indian Law, Under Arbitration & Conciliation Act, 1996 there exist two avenues for the enforcement of foreign awards, these are the New York Convention and the Geneva Convention.
In this Article, we’ll learn about the following
- What Conventions actually are?
- International Commercial Arbitration Convention.
- Provisions mentioned under Arbitration & Conciliation Act, 1996 regarding the recognition and enforcement of foreign Arbitration Awards.
WHAT IS CONVENTION?
Convention in a general sense means, an agreement made between two or more state, for the function, regulation & benefit of all of them.
A convention is a very basic term which signifies traditional ways of doing something or behaving in a particular manner. The various States for the maintenance of international security, well-being, peace and order agree among them on certain guidelines, principles & procedures and Code of conduct.
The most common conventions include industry, trade, transport and professional conventions. However, in this article we’ll be dealing with international commercial arbitration conventions, which includes, the infamous New-York Convention & Geneva Convention.
INTERNATIONAL COMMERCIAL ARBITRATION CONVENTION.
GENEVA CONVENTION
Geneva Protocol, 1923 or Geneva Convention, 1927 were the two important conventions which laid the foundation for execution of the arbitration agreements and foreign arbitral awards.
Under Geneva Protocol, 1923 enforced compulsory settlement of disputes and also founded a method to determine the aggressor in international disputes or conflicts. Under this, a nation or country which refused to compromise with the rules & guidelines mentioned, was regarded as the aggressor and the country against whom aggression was practiced was entitled to receive compensation from the league members.
Under Geneva Convention, 1927 Article (1)[i] states that an arbitral award in pursuance of the agreement, shall be recognized as a binding and shall be enforced according to the rules of procedure of the country, the award is relied upon.
NEW-YORK CONVENTION
New-York Convention (New-York,1958) also known as the United Nation Conventions for the recognition and enforcement of Foreign Arbitral Awards, 1958 is one of the most well-known and most important convention of the United Nations in the history of Arbitration agreements, laws, international trade and relations. Under the New York Convention, recognition is being given to the rights of the states to arbitrate, and to enforce the foreign Arbitration Awards.
The UNCITRAL adopted the first edition of notes regarding the arbitral proceedings in 1996 and the second edition in 2016. In 2016, a secretariat guide regarding the arbitral proceedings was also published. The main focus of the New-York Convention, as mentioned in its title, was the recognition and enforcement of Foreign Arbitral Awards.
EUROPEAN CONVENTION
European Convention on International Commercial Arbitration, 1961 (ECICA) is the most important regional instrument, mainly established to enforce Arbitration agreement among the European states. It includes provisions related to the enforcement, recognition of Arbitration agreements and arbitral awards.
There are many more conventions related to recognition & enforcement of Foreign Arbitral Awards it includes: –
- Panama Convention, 1975
- International Centre for the Settlement of Investment Disputes (ICSID) Or Washington Convention, 1965.
PROVISIONS UNDER ARBITRATION AND CONCILIATION ACT, 1996
Under, Arbitration & Conciliation Act, 1996 two avenues for the recognition and enforcement of Foreign Awards are mentioned. These are: –
- New-York Convention
- Geneva Convention
NEW-YORK CONVENTION
Sec 52 provides that provisions under New-York Convention will not be applicable in case of Geneva Convention.
Section 44-52 of the Arbitration and Conciliation Act, 1996 contains the provisions for Foreign Awards contained under New-York Convention.
As per the New-York Convention, the term ‘Foreign Award’ means an arbitral award based on conflicts among the nations or people arising out of contractual or non-contractual obligations, but is must be legal obligation of the parties and must be regarded to be as commercial according to the law of India, enforced on or after 11th October, 1960.
- In pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and
- 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.[ii]
The above-mentioned provisions state the essential requirements for the enforcement of foreign arbitral awards, these requirements are as following: –
- There must exist a written agreement for Arbitration regarding such convention
- The award must be given in a country or nation which is reciprocating territory or state and such information must be notified by the central government.
Sec 45 of the act states that, in case any of the party, is prevented from doing anything or seized from performing an action for which the arbitration agreement was made (in reference to sec 44) in such case the state shall provide such party or anyone claiming the right (through or under such party) with the arbitration.[iii]
Sec 46 of the act defines ‘When the ‘Foreign Award’ will be binding’. According to Sec 46 enforcement of Foreign Awards shall be applicable to all the persons, between whom such agreement was made or entered into.[iv]
Sec 48 of this act defines ‘Conditions for the Enforcement of Foreign Awards’. Section 48 imposes certain objections on the enforcement of Foreign Awards by putting up certain conditions. It states that Arbitration award shall not be provided if: –
- The agreement of Arbitration due to some reason became invalid (such as incapacity of parties)
- The parties didn’t have prior notice of the arbitral proceedings or was incapable of presenting his case.
- Award was for some reason not falling under the terms of submission to Arbitration or it contains matters beyond the scope of subject of Arbitration.
- If arbitral proceedings were not according to what was agreed between the parties.
- The agreement was not yet binding upon the parties or was set aside by judicial authorities for review.
- Subject matter was not capable of Settlement by Arbitration.
- Enforcement of award would be contemporary to the public policy in India.
Sec 49 provides for the ‘Enforcement of Foreign Award’. Enforcement of foreign awards depends upon the discretion of the courts. These Arbitral Awards will be enforced, if the court feels the need for their enforcement.
GENEVA CONVENTION
Sec 60 of the Arbitration and Conciliation Act, 1996 provides that provisions under Chapter II of Part IV of this act will not affect any right of any person to avail any ‘foreign award’, if this chapter has not been enacted.
Sec 53-60 of the Arbitration and Conciliation Act, 1996 deals with the recognition and enforcement of Foreign Awards under Geneva Convention.
Sec 53 of this act defines the term ‘Foreign Award’ as arbitral award on differences relating to matters considered as commercial under the law, in India made after 24th July, 1924.
Sec 54 of this act defines the ‘Power of the Judicial Authorities to refer parties to Arbitration’ any judicial authority in case of a dispute arising between the parties among whom the arbitration agreement was made or entered into, shall refer the parties or anyone claiming through or under them, to the arbitrator’s decision.[v]
Sec 55 of this act defines – ‘Foreign Awards When Binding’. The foreign awards under Geneva Convention, will be binding for all the purposes on any person who is a party under such contracts and it shall also be relied upon as a defense in case of legal arbitral proceedings.[vi]
Sec 57 of this act defines ‘Conditions for enforcement of Foreign Awards’. This section restricts or imposes certain restrictions on enforcement of Foreign Awards by putting up certain conditions. These are as follows: –
- If the award is given in pursuance of agreement which is valid according to the law.
- The subject matter of award is capable of settlement under Arbitration.
- Award must be constructed according to the instructions mentioned in arbitration agreement.
- The decision for the award has been made final in a country and such decision is not open to any amendments.
- Enforcement of the award is not contrary to the public policy of Indian Law
Sec 58 of this act defines ‘Enforcement of Foreign Awards’. The enforcement of Foreign Awards under Geneva Convention depends upon the discretion of the court regarding the matter. If the court finds the need, then it will grant such award.
CONCLUSION
The Arbitration and Conciliation Act, 1996 made it way more easier to solve the ever-lasting disputes and the lengthy, time-consuming court proceedings have now become effective and efficient. The Arbitration has made it easier to solve the disputes and conflicts.
Foreign Arbitral Awards are necessary to ensure effectiveness of any Arbitration process and an effective Arbitration process is necessary to ensure proper execution of the agreement and settlement of disputes. For timely solutions, Arbitration has proved to be better than the old traditional methods. In a developing country, like India, where the crime rate is growing rapidly, the chances of frauds, misrepresentation etc. are also growing, in such countries a traditional method of solving disputes will not be able to do justice and even if it does it’ll cost both the parties their lifetime. So, in order to secure speedy recovery, more modern methods must be used. In any contract, effectiveness and efficiency is the key of success. Hence, in order to promote such effective and efficient means of disputes solving, as Arbitration agreements, the Foreign Arbitral Awards are the necessary.
References
[i] ARTICLE 1
In the territories of any High Contracting Party to which the present Convention applies, an arbitral award made in pursuance of an agreement, whether relating to existing or future differences (hereinafter called “a submission to arbitration”) covered by the Protocol on Arbitration Clauses, opened at Geneva on September 24, 1923, shall be recognized as binding and shall be enforced in accordance with the rules of the procedure of the territory where the award is relied upon, provided that the said award has been made in a territory of one of the High Contracting Parties to which the present Convention applies and between persons who are subject to the jurisdiction of one of the High Contracting Parties. https://www.trans-lex.org/511400/_/convention-on-the-execution-of-foreign-arbitral-awards-signed-at-geneva-on-the-twenty-sixth-day-of-september-nineteen-hundred-and-twenty-seven/
[ii] Sec 44 of Arbitration & Conciliation Act, 1996
[iii] Sec 45. Power of judicial authority to refer parties to arbitration. -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 finds that the said agreement is null and void, inoperative or
incapable of being performed.
[iv] Sec 46. When foreign award binding. – 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 defense, 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.
[v] Sec 54 Power of judicial authority to refer parties to arbitration. -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 an 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.
[vi] Sec 55. Foreign Award When Binding. -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 defense, 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.
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