Arbitration and conciliation act- enforcement of foreign awards (New York Conventions)

Enforcement of foreign awards

Introduction

 

Part II of the Arbitration and Conciliation Act deals with enforcement of foreign awards.

There has been tremendous growth in international trade and commerce. It is therefore necessary that is an easy dispute settlement mechanism.

Take this example; Reliance (Indian Company) is dealing with Dassault Co (Rafale Fame French Company). During their commercial engagement dispute arises. They decide to go to arbitration in France. Arbitrator asks Reliance to pay 100 Crore Rs to Dassault.  Do France court have authority to enforce Reliance to give 100 Crore, because Reliance is situated in India?  Who should force Reliance to pay that money to French Company?  These are the questions answered by part II of the Arbitration and conciliation Act.

We will see section by section to understand this part.

 

Section 44- Definition (Article I in New York Convention)

 

This section defines what “foreign award” is.

It states that when there is legal relationship of commercial nature, and dispute arises between them. Then such party goes arbitral award in foreign institution.  Foreign institution then declare the arbitral award, such an award is foreign award.

Note that award should be made in country which are signatory to New York Convention. Apart from that central government may declare territories on which is award is declared would be under “foreign award”.

Whole purpose of this is to do expeditious settlement of disputes between parties from two different nations. Hence in various judicial decisions court held that word “commercial” in section should be given broad meaning.

Section 45- Power of judicial authority to refer parties to arbitration

 

This section talks about judicial power.

Court have given a power to refer a parties to arbitration.

When there is an arbitration agreement between parties, court shall refer the parties to arbitration.

However court have to satisfy that arbitration agreement is valid. Also if court thinks agreement is inoperative and incapable of being performed, in this case also court may not refer matter to arbitration.

Section 46- When foreign awards binding (Article III in New York Convention)

 

This section states that any foreign award which is enforceable under this part i.e part II of the act, then such an award will be binding on person  between whom arbitration was carried out and award was made.

 

Section 47- Evidence (Article VI in New York Convention)

 

Please refer the Reliance-Dassault example we have seen earlier. Now if Dassault want to enforce foreign award  against Reliance, what all evidence it has to give to court? Section 47 answers this question.

It prescribes below evidences by a party who seeks to enforce foreign award.

1)      Original award or copy of it, which should be authenticated according to the law of that country in which it was made

2)      The original agreement for arbitration or a certified copy of arbitration agreement, and

3)      Such other evidence as may be necessary to show that the award is a foreign award

If award is in foreign language, such an award should be translated to English by parties.

It’s expected that Courts are not too strict with regard to above documents.

Section 48- Conditions for enforcement of foreign awards

 

Let’s again take the example of hypothetical Reliance-Dassault case. Arbitral award is to be invoked against Reliance at the request of Dassault. This section provides that if Reliance can furnish certain proofs, then award can be refused. What are those proofs are discussed in this section.

1)      If parties to agreement were under some incapacity, then such arbitration agreement is invalid itself and hence the foreign award can be refused. Also if parties make an arbitration agreement that they would submit to Indian laws, and if later it found out that such an agreement was invalid, in that case too arbitration award can be refused.

2)      If parties against who enforcement was invoked was not given proper notice of appointment of arbitrator or the arbitral proceedings

3)      If award is not contemplated differences not referred to the arbitral tribunal. Meaning award have considered some other difference and dispute among parties, which parties have not mentioned in arbitration agreement. When arbitration tribunal extends it’s jurisdiction and declare an award such award can be refused.

4)      In below cases also arbitration award can be refused

·         When the composition of the arbitral authority is not in compliance with the agreement of the parties

·         When the arbitral procedure adopted, is contrary to the provisions of the agreement of the parties

·         When the arbitration agreement itself is contrary to the law of the of country, where the arbitration took place

5)      If award is set aside by competent country where arbitration is carried out then arbitration award can be refused.

In above cases party against who award is enforced can stall enforcement of award.

Apart from above cases, there are additional grounds on which court can reject and refuse the award. Those two grounds are as below

1)      The subject matter of difference, or a dispute was not capable of settlement by arbitration. It means there are some matters which must be resolved by judicial process only, and if such matters are decided by Arbitration, then such award can be refused.

2)      If enforcement is carried out and it affects or is opposed to public policy then also such awards can be refused. This is very important. Pharmaceutical companies have patents, because of which other companies cannot manufacture life saving drugs. If award is prohibiting manufacture, then it would be opposed to public policy as life of citizens are of paramount importance and hence in such cases award can be refused.

Section 49- Enforcement of foreign award

 

If court comes to conclusion that award is enforceable, then such award will act like a decree of a court. (And everybody has to obey it!).

The award must be executed in the form and terms in the award. It cannot be altered.

Section 50- Appealable orders

 

If court refuses to refer parties to Arbitration under section 45, then appeal will lie.

If court refuses to enforce arbitral award then also appeal can be made.

This section also provides that no second appeal should lie. It mean after appeal there will be decision on that appeal. That decision you cannot appeal. However there is proviso which says you can appeal to Supreme Court.

Section 51- Saving

 

Section 51 is similar to Article VII(1) of New York Convention. It says enactment of this part won’t affect any right of person who would have enforced any award had this part is not enacted.