INTRODUCTION TO INTERNATIONAL COMMERCIAL ARBITRATION: THE INDIAN PERSPECTIVE

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The governmental policies of liberalisation and globalisation adopted in 1991 have resulted in an increased involvement of foreign entities in the Indian economy by way of foreign investment and collaborations with domestic businesses. Any dispute arising out of a commercial contract between private parties across national boundaries may be resolved by litigation in the national courts. However, International Commercial Arbitration, which is an alternative dispute resolution mechanism, is steadily becoming the go-to option for the parties involved. This is primarily owing to the characteristic lethargy of the traditional adjudicatory authorities and the backlog of cases in the Indian courts. Thus, the cost-effective and speedy solutions offered by the process of International Commercial Arbitration contribute towards making it the more attractive route. As a result, a major fraction of the commercial contracts nowadays contain a dispute resolution clause which specifies arbitration to be the chosen method for the settlement of disputes arising under the contract. The terms and conditions of such arbitration including the seat of arbitration and the governing laws may also be agreed upon by the parties at the time of entering into the contract.

  1. SOURCES OF ARBITRATION LAW:

The sources of arbitration law may be classified into primary and secondary. The primary sources, on the one hand, include international treaties and conventions, national legislations, rules adopted by the various arbitral institutions as well as previous arbitral awards. On the other hand, the secondary sources comprise of law journals, books, encyclopedias and treatises and such other scholarly articles regarding international arbitration law.

II.  DEFINITION AND SCOPE UNDER THE ARBITRATION AND CONCILIATION ACT 1996:

The term “International Commercial Arbitration” has been defined under section 2(f) of the Arbitration and Conciliation Act 1996, which reads as under:

“international commercial arbitration” means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is—

(i) an individual who is a national of, or habitually resident in, any country other than India; or

(ii) a body corporate which is incorporated in any country other than India; or

(iii) an association or a body of individuals whose central management and control is exercised in any country other than India; or

(iv) the Government of a foreign country”

Prior to the Amendment Act of 2015, clause (iii) above included the words “a company” as well. These words were, however, omitted from the clause by the 2015 Amendment, thereby confining the purview of the definition to “an association or a body of individuals”.

From the abovementioned definition, it can be inferred that under the Arbitration and Conciliation Act 1996, an arbitration which involves a foreign entity but where the seat of arbitration lies in India, would be subject to Part I of the said Act.

The scope of the definition was also discussed by the apex court in its judgement in the case of TDM Infrastructure Pvt. Ltd. v. UE Development India Pvt. Ltd.[1] wherein the Hon’ble Court observed that “a company incorporated in India can only have Indian nationality for the purpose of the Act”. Thus, though the Act recognizes companies controlled by foreign hands as a foreign body corporate, the Supreme Court has excluded its application to companies registered in India and having Indian nationality. Hence, in case a corporation has dual nationality, one based on foreign control and other based on registration in India, for the purpose of the Act, such corporation would not be regarded as a foreign corporation.[2]

III.  INTERNATIONAL COMMERCIAL ARBITRATION UNDER THE UNCITRAL MODEL LAW:

The United Nations Commission on International Trade Law (UNCITRAL) is the core legal body of the United Nations system in the field of international trade law. Its mandate is to remove legal obstacles to international trade by progressively modernizing and harmonizing trade law. It prepares legal texts in a number of key areas such as international commercial dispute settlement, electronic commerce, insolvency, international payments, sale of goods, transport law, procurement and infrastructure development.[3] Notably, India is one of the thirty member states of the Commission.

Article 1(3) of the UNCITRAL Model Law states as under:

“An arbitration is international if:

(a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States; or

(b) one of the following places is situated outside the State in which the parties have their places of business:

(i) the place of arbitration if determined in, or pursuant to, the arbitration agreement;

(ii) any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected; or

(c) the parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country.”

IV. INTERNATIONAL CONVENTIONS AND TREATIES:

India is a signatory to the following international conventions related to arbitration:

  • New York Convention:

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the “New York Arbitration Convention” or the “New York Convention”, is one of the key instruments in international arbitration. The New York Convention applies to the recognition and enforcement of foreign arbitral awards and the referral by a court to arbitration.[4] India became a signatory to the New York Convention on 10 June 1958 and ratified it on 13 July 1960.

It must be noted that Chapter I of Part II of the Arbitration and Conciliation Act, 1996 deals with awards under the New York Convention.

  • Geneva Protocol on Arbitration Clauses 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards 1927:

The Protocol deals with the recognition of arbitration agreements; each of the Contracting States undertakes to recognize the validity of such agreements between parties subject to the jurisdiction of different Contracting States. The Convention provides that an arbitral award made pursuant to an arbitration agreement covered by the Protocol shall be recognized as binding and shall be enforceable in the territories of the Contracting States, subject to certain conditions, among them the condition of reciprocity. The Protocol has been ratified by fifty-three countries and the Convention by forty-four countries. These two arrangements have been the foundation for the acceptance of international commercial arbitration as the most practical method of settling disputes arising from transactions of international trade.[5]

The Chapter II of Part II of the Arbitration and Conciliation Act 1996 deals with awards under the Geneva Convention 1927.

V. RECENT AMENDMENT:

The Arbitration and Conciliation Bill 2019, which received the presidential assent on 9 August 2019, amends the 1996 Act. With regards to international commercial arbitration, one key amendment has been brought into force.

The Arbitration and Conciliation Act 1996 (as amended by the 2015 Amendment Act) had imposed a time-limit of 12 months for any arbitral award. This provision was embodied in section 29A of the said Act. Whereas, the 2019 Amendment Act expressly excludes international commercial arbitration from the ambit of this restriction by introducing a change in the language of the text. The newly included proviso to sub-section 1 of section 29A reads as under-

“Provided that the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavour may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23.’’

The change can be viewed as an attempt to encourage the speedy disposal of proceedings in an international commercial arbitration, without resorting to a stringent deadline to accomplish the same. Thus, it ensures the efficient functioning of the arbitral tribunals while keeping their autonomy intact.

[1] 2008 (14) SCC 271

[2]http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research_Papers/International_Commercial_Arbitration.pdf

[3] http://www.unis.unvienna.org/unis/en/pressrels/2018/unisl270.html

[4] http://www.newyorkconvention.org

[5] https://www.jus.uio.no/lm/un.sg.report.itl.development.1966/_2.html



Report submitted by-

Aditi Srivastava