COMMERCIAL RESERVATION CLAUSE

The New York Convention and its Application in India

INTERNATIONAL TRADE LAW

VIII TRIMESTER, III YEAR

DATE OF SUBMISSION: 17th December 2017

SUBMITTED BY:

JOHN SIMTE

ID. NO. 2232

 TABLE OF CONTENTS

I. Introduction 3

II. History of the New York Convention & Commercial Reservation 4

III. Commercial Reservation Clause & India as a Contracting Party 8

IV. Conclusion 12

Bibliography 13

Books 13
Case Laws 14
Domestic Legislations 15
International Instruments/Documents 15

2
 I. INTRODUCTION

The New York Convention - also known by its primary name, “Convention on the Recognition
and Enforcement of Foreign Arbitral Awards” (hereinafter also as “the Convention”) of 19581 has
since its induction into the framework of international commercial arbitration law contributed
significantly towards its objective, namely that of, inter alia to provide for a sound, cohesive and
mutually acceptable procedure for parties engaging in international commercial arbitration, coming
from different legal systems. Not only that, it also meets the standard that is set for in the
arbitration framework, which as one leading scholar of international commercial arbitration
succinctly puts it, “...legal framework should at least provide that the commitment to arbitrate is enforceable and
that the arbitral decision can be executed in many countries…the New York Convention can be considered as the
most important Convention in the field of arbitration and as the cornerstone of current international commercial
arbitration.”2That said, the Convention along with its interlinked and allied instrument(s) such as
the UNCITRAL Model law3 and national arbitration legislations have emerged as important tools
in continuously growing and expanding regional powerhouse economies like India. This has been
primarily, due to the high inflow of foreign investment and transactions in the country, which
resultantly has meant the need for quicker and greater efficiency in adjudicatory mechanisms
differentiated from the judicial system – available in the form of commercial arbitration.

Therefore, it becomes all the more crucial to acknowledge that although there exists a series of
‘complexities’ that have arisen in the national courts of states parties to the Convention on issues
amongst other things, to take the closest example like the reciprocity clause. In light of the same, the
broad and overarching principle objective of this paper is to contribute to the limited but slowly
growing body of scholarship that exists in India on the Convention. More specifically, on the scope
of this paper is to sufficiently expound on one of these complexities, namely the ‘Commercial
Reservation’ clause found in Article I (3) of the Convention.4 And flowing from this, explore its
relationship with India with respect to the national courts as well as the Arbitration and
Conciliation Act, 1996. And, while operating within this defined scope, I will attempt to argue that
the courts ought to continue progressively and expansively interpreting ‘commercial’ in line with
international guidelines and for the larger purpose – of facilitating an environment in the country
for robust economic investment and growth.

1 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 330 U.N.T.S 3.
2 A.J Van den Berg, THE NEW YORK ARBITRATION CONVENTION OF 1958, 51 (1981).
3 UNCITRAL Model Law on International Commercial Arbitration, General Assembly resolution 61/33 of 4

December 2006.
4 This clause allows state parties to the Convention, including India to apply the “Convention only to differences arising out

of legal relationships, whether contractual or not, that are considered commercial under the national law”.

3
 II. HISTORY OF THE NEW YORK CONVENTION & COMMERCIAL RESERVATION

The beginning of the 20th century saw the growing prominence of international commercial
arbitration but this came along with a set of highly restricted and differential principles followed
by the domestic legislations on arbitration of the countries that had such laws. In that, the year’s
following World War I saw an upsurge in the use and application of per se international arbitration
as it was the primary way of resolving disputes between states.5 This thereby also lead to the
institution of the International Chamber of Commerce in Paris for the promotion of an
international convention. And it was hoped that through this, the unenforceability of the arbitral
clause for the adjudication of any disputes that may arise in the future would be eliminated.

The Geneva Protocol on Arbitration Clauses of 19236 (hereinafter referred to as ‘the/this

Protocol’) was the first attempt of the League of Nations to require contracting state parties to
enforce arbitration agreements (for both existing and future disputes).7 Since, through this
protocol, the arbitral clause’s validity and enforceability was effectively established, there was now
a need to move ahead and develop a mechanism for enforcing arbitral awards. This took shape in
the form of the Geneva Convention on the Execution of Foreign Awards of 1927 (hereinafter
referred to as the ‘Geneva Convention’) thereby also acted as an aid for enforcing arbitration
awards that were drawn from the arbitration agreements under the Protocol.8

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which came
into force in New York on June 10th 1958 was primarily due to a pronounced drift of dissatisfaction
with the Geneva regime.9 In fact, the final draft of the Convention was preceded by an elaborate
and extensive consultative process, which began with the draft preferred by the ICC10 and

5 J.D Fry, Military-related disputes before the PCIJ and the ICJ, LEGAL RESOLUTION OF NUCLEAR NON-PROLIFERATION
DISPUTES, 212 (2013); see also G. Born, INTERNATIONAL COMMERCIAL ARBITRATION: COMMENTARY AND
MATERIALS, 29-30 (2nd ed. 2015).
6 The Geneva Protocol on Arbitration Clauses of 1923, July 28, 1924, 27 League of Nations Treaty Series 157.
7Art. 1, The Geneva Protocol on Arbitration Clauses of 1923, July 28, 1924, 27 League of Nations Treaty Series 157;

It also provided for a clause as per which the court of a party to the Convention to refer the parties involved in the
dispute to arbitral tribunal if it was seized of a dispute regarding which it had been agreed to arbitrate; see also G. Born,
INTERNATIONAL COMMERCIAL ARBITRATION: COMMENTARY AND MATERIALS, 20-21 (2nd ed. 2015).
8 The Geneva Convention on the Execution of Foreign Awards of 1927, 92 League of Nations Treaty Series 301.
9 The Geneva Treaties represented a marked improvement however they were lacking adequacy because of a number

of issues such as the limited field of application, the necessary condition being that the Contracting State should have
been the position of the arbitral award. see E.Lorenzen, Commercial Arbitration – International and Interstate Aspects, YALE
LAW JOURNAL, 716 (1933-1934).
10 Post-WWII, the ICC embarked on an academic mission towards the crystallization of a new Convention that would

leave the jurisdiction of a national law on arbitration. The motivation for this arose out of a condition existing in the
previous regime, that of the constitution of the arbitral tribunal and the arbitral procedure should “have taken place in
conformity with the law governing the arbitral procedure” However, this objective of the ICC was not acceptable to a majority
of the States see International Chamber of Commerce, Enforcement of International Arbitral Awards – Report and Preliminary
Draft Convention, ICC Brochure No. 174 (1953) also available at UN DOC E/C.2/373.

4
thereafter the ECOSOC11 and culminated in the ‘Conference on International Commercial
Arbitration’ (between May 20 to June 10, 1958) that produced the final draft (as also is available in
its present form). It has been consistently accorded recognition and status as the most successful
multi-lateral treaty in the field of private international law.12

The primary field of analysis of this paper as already discussed before will be Article I (3) within
Article I of the Convention. However, before going on to examine the contours and application
of the ‘Commercial Reservation’ clause, it is important to broadly understand the scheme of Article
I. In that, this article sets out the scope of the Convention and serves as the foundational edifice
of the Convention. Article I (1) makes the Convention applicable to the recognition and the
enforcement of arbitral awards “made in the territory of a State other than the State where the recognition and
enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal”. It
also states that the Convention is applicable to awards that are “not considered as domestic awards in the
State where their recognition and enforcement are sought”. Further, Article 1(2) brings out the meaning of
‘arbitral awards’ to include “not only awards made by arbitrators appointed for each case but also those made
by the permanent arbitral bodies to which the parties have submitted”. Article 1(3) provides an option to
every state, when signing, ratifying or acceding to the Convention, to limit the extent to which the
Convention will apply through a procedure for preferring reservations allowed by the Convention
itself. This reservation is expressed in the following terms, wherein a Contracting State can declare
that the application of the Convention within its jurisdiction will be “only to differences arising out of
legal relationships, whether contractual or not, which are considered as commercial under the national law of the
State making such declaration”.13

In this context, it also becomes important to go a little deeper into the historical antecedents of
the ‘commercial reservation’ clause and note a couple of points for discussion. First, the
‘commercial reservation’ was present under Article 1(2) of the Geneva Protocol of 1923. Second,
the ad hoc committee of the ECOSOC which prepared the draft text of the Convention deliberated
at length over the issue of whether a limitation should be made on the Convention to apply to
arbitral awards that proceed from commercial disputes. And, after noting that a number of
countries do not distinguish between commercial and civil matters, it was decided by the

11 The draft prepared by the ECOSOC was closer in character to the Geneva regime and this was evident in the title
instituted for its draft – ‘Foreign Arbitral Awards’ as opposed to its previous form (that of the ICC) being ‘International
Arbitral Awards’ see
12 “It is adhered to by more than and over 140 nations and the more than 1,400 court decisions reported in the

Yearbook: Commercial Arbitration show that enforcement of an arbitral award is granted in almost 90 percent of the
cases” see A.J van den Berg, Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1 UNITED NATIONS
AUDIOVISUAL LIBRARY OF INTERNATIONAL LAW (2008).
13 This essentially means that for an award to benefit from the substantive provisions and mechanism established by

the Convention, the award has to arise out of a legal relationship that is considered as ‘commercial.’

5
Committee to not limit the Convention’s scope of application to commercial disputes. It was only
on the penultimate day of the Conference in New York, which was earlier convened to work
towards a draft convention, that ‘commercial reservation’ was added because of the suggestion
preferred by the Dutch delegation.14

Further, it also becomes pertinent for better conceptual understanding to dissect the substance of
the ‘commercial reservation’ clause into two parts and explain their general meaning status. The
first one being that, “legal relationships considered as commercial under the national law of the State making
such declaration” has been subject to an expansive interpretation by courts generally.15 For instance
the Gujarat High Court in India while deciding a civil suit arising out of a chartered party contract
which had a foreign arbitration clause understood the phrase “of the largest import” to be inclusive
of “all the business and trade transactions in any of their forms including the transportation, purchase, sale and
exchange of commodities between the citizens of different countries”.16

Similarly, the District Court of New York held rejected the contention that an award that was in
relation to a contract that was given to a company to operate an electronics manufacturing industry,
that would create thousands of jobs, was not commercial. Despite, the court not particularly well
versed with the implications of a clause of commercial reservation, it ruled the notion of
‘commercial relationship’ to be broad, noting that its purpose is only “to exclude matrimonial and other
domestic relations awards, political awards and the like”.17 It is true that a push has been made towards an
overwhelming expansion and progressive liberal construction of the word ‘commercial’ across
jurisdictions, to include inter alia a JV agreement for establishing and operating a chain of stores18
or a contract for purchasing cereal.19

However, there have been a number of cases in different courts, which prove that the earlier
thinking about the commercial reservation clause – it would be a smooth sail without a venture
into rough waters was incorrect. Instead, what has happened with the ever-growing scale of
business and other ‘commercial’ activities between countries is the highly disparate understanding
of ‘commercial’ in various countries. Amongst other(s), this example in India of the High Court

14 The reasoning for this was that the text of the Convention, if it remained as it was drafted – limiting the application
of the Convention to commercial disputes, would cause implementation difficulties and challenges to countries,
wherein there was a distinction made between commercial law and civil law. see Summary Record of the Twenty-third Meeting,
7,12, UNITED NATIONS CONFERENCE ON INTERNATIONAL COMMERCIAL ARBITRATION E/CONF.26/SR.23.
15 M. Pryles, Reservations Available to Member States: The Reciprocal and Commercial Reservations, ENFORCEMENT OF

ARBITRATION AGREEMENTS AND INTERNATIONAL ARBITRAL AWARDS: THE NEW YORK CONVENTION IN
PRACTICE 161, 178-79 (E.Galliard, D.Di Pietro eds., 2008).
16 Union of India v. Lief Hoegh, 1982 SCC OnLine Guj 57, 40 (High Court of Gujarat).
17 Island Territory of Curaco v. Solitron Devices, Inc., 489 F.2d 1313 (United States Court of Appeals, Second Circuit).
18 Trevino Hernandez v. Smart & Final Inc. 09-cv-2266 BEN (District Court, Southern California).
19 West Plains Company v. Northwest Organic Community Mills Co-Operative Ltd., 2009 SKQB 162 (Queen’s Bench

for Saskatchewan).

6
of Bombay stand out.20 In this case, the court was deciding a suit involving inter alia transfer of
technology between a consortium of American corporations and an Indian company for the
construction of a polyester stable fire plant in India. And, wherein the American party upon being
sued applied for a stay and had invoked the arbitral clauses. The court gave an overly literal,
restrictive and narrow interpretation of commercial reservation, in that although it observed that
the character of the agreements was commercial and covered a broad range of commercial activity.

However, while referring to the Convention’s former implementing Act–the Foreign Awards
(Recognition and Enforcement) Act, 1961, it stated that for Sec.3 which provided for a stay in the
proceedings to be invoked, not only the agreement itself has to be commercial. But, also that it
has to be “commercial by virtue of a provision of law or an operative legal principle in force in India”.21 Thereby,
by using this reasoning, the court defeated the underlying object and purpose of the Convention
– facilitating enforcement of arbitration clauses in India and had then effectively added to the
uncertainty in the business environment as to “whether an arbitral clause contained in a contract with an
Indian party will be enforceable”.22

Another ancillary issue that has a degree of relevance is whether the phrase in the clause “whether
contractual or not” includes tortious claims. In that, in two specific instances, one in the Court of
Appeal of Alberta in Canada and the High Court of Delhi, they reinstated the fairly settled
common point that has been agreed upon – of it being inclusive of claims in torts. In the former
case, the court held the Convention’s “scope extends to liability in tort so long as the relationship that creates
liability is one that can fairly be described as commercial”.23 Similarly, in the latter case, the court held that
the application of the Convention extends to “disputes arising out of legal relationships whether stricto sensu
contractual or not provided they are considered as commercial under the domestic law of the State making such
declaration”.24

20 India Organic Chemicals, Ltd. v. Chemtex Fibres Inc., 1977 SCC OnLine 140 (High Court of Bombay). [“Indian
Organic Chemicals”]. This view was rejected the High Court of Bombay’s Division Bench in European Grain and
Shipping Ltd. v. Bombay Extractions(P) Ltd., AIR 1983 Bom 86 (High Court of Bombay), where the court ordered
the enforcement of the award and held that a legal relationship would be commercial if it was concerning a trading
activity. Moreover, the court was also of the opinion that the implementation of the 1961 Act was to give effect to
the Convention. Specifically, on Article 1(3), the court said “commercial” would include a “trading activity, like buying
and selling”, which is going by the facts of this case is evident. Also, it said the word ‘under’ which was placed before
the ‘law in force in India’ “would not necessarily mean” that there should be a corresponding statutory provision
which was in specific relation to the subject of a legal relationship as being “commercial in nature”. Further, it said
that “we have no doubt that the contract in the instant case which was for the sale and purchase of a commodity, was clearly a contract
which brought about legal relationship which was commercial in nature under the Indian law”.
21 Indian Organic Chemicals, 1977 SCC OnLine 140, 51, 60.
22 Supra note 2 at 54.
23 Kaverit Steel v. Kone Corp ABCA 7 (Court of Appeal of Alberta, Canada).
24 Gas Authority of India Ltd. v. Spie Capag SA, 1993 SCC OnLine Del 561, 571 (High Court of Delhi).

7
The United Nations Commission on Trade Law adopted the UNCITRAL Model Law on
Commercial Arbitration on 21 June 1985 with the objective of securing harmonisation in the
international commercial arbitration regime through the adoption of similar national laws.
Subsequently, the General Assembly also reaffirmed this principle in a resolution, and stated that
“all states give due consideration to the Model Law on International Commercial Arbitration, in view of the
desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial
arbitration practice”.25 Although, the model law steers away from bringing out an exhaustive
definition of ‘commercial’, it adds a footnote to Article 1 and states, the word ‘commercial’ should
be given a wide interpretation “so as to cover matters arising from all relationships of a commercial nature,
whether contractual or not and relationships of a commercial nature, include, but are not limited to…”.26

The object of mentioning the model law at this stage, is to provide a brief frame of reference for
the next section, which forms the nucleus of this paper in how it traces the evolution of the
‘commercial reservation clause’ in India. And, specifically its interpretation by the highest court of
the land of common law country like India wherein the rule of stare decisis is supreme and also is
constitutionally safeguarded.

III. COMMERCIAL RESERVATION CLAUSE & INDIA AS A CONTRACTING PARTY

The relationship that India has had with the international commercial arbitration regime goes right
back to the Geneva Protocol of 1923 and the Geneva Convention of 1927, which was ratified by
it on October 23rd, 1937. It is rather interesting to note the commercial reservation expressed by
India then, which reads “India reserves the right to limit the obligations mentioned in the first paragraph of
Article 1 to contracts which are considered to be commercial under its national law”.

Thereafter, India was also the original signatory to the New York Convention and had ratified it
on 13th July 1960. Following which, India has over time proceeded and strived toward creating a
statutory basis (with fairly time bound revisions) for arbitration in the country.27 This development
of the statutory basis started with the Arbitration (Protocol and Convention) Act, 1937, the Indian
Arbitration Act, 1940 and the Foreign Awards (Recognition and Enforcement) Act, 1961 (all now
repealed). They were replaced by the coming in of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as the Act – last amended in 2015) which inter alia was based on the

25 United Nations General Assembly Resolution 40/72 on December 11, 1985.

26 UNCITRAL Model Law on International Commercial Arbitration, UN DOC A/40/17, annex I and A/61/17,
annex I), on 21 June 1985.
27 F.S Nariman, Application of the New York Convention in India, 25(6) JOURNAL OF INTERNATIONAL ARBITRATION 893-

895 (2008).

8
principles enunciated in the UNCITRAL Model Law and incorporates the New York Convention,
from Sec. 44 to 52 in Part II Chapter I of the Act.28

That being said, at first it is important to recognise that the Act has not given a definition for the
word ‘commercial’. Although, the preamble of the Act makes an explicit reference to the
UNCITRAL Model Law and the term ‘international commercial arbitration’ has been defined
under Section 2(1)(f).29 It has been left to the courts and especially the Supreme Court (as its
decisions will define the outline of this section) to interpret subjectively what is ‘commercial’ in
harmony with the phrase “…considered as commercial under the law of India” within the ‘commercial
reservation clause’ under the Convention.30

Generally, the Supreme Court has followed a relatively consistent approach towards its
interpretation of the word ‘commercial’ barring a few exceptions. However, leaving it at that would
be unfair to the progressivity that has often been displayed by the court. Therefore, our discussion
on this subject matter would be incomplete without the Supreme Court’s decision in Atiabari Tea
Co.Ltd. v. State of Assam.31 In this case, the court in deciding the constitutionality of the Assam
Taxation (on Goods Carried by Roads or Inland Waterways) Act, said “trade and commerce do not
mean merely traffic in goods, i.e. exchange of commodities for money or other commodities. In the modern complexities
of modern conditions, in their wide sweep are included carriage of persons and goods by road, rail, air and
waterways….which may be called commercial intercourse”.32 Further, stating that although the movement
of goods from one place to another may in some instances be an important ingredient of effective commercial
intercourse’ but movement itself is not an essential to constitute ‘commercial intercourse’, as it would
render dealing in goods and other commercial activities that do not have a concept of movement
as to be not constitutive of ‘commercial intercourse’.

28 Under Sec. 44, “foreign award” means 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 – (a) in pursuance of an agreement in writing for arbitration to which the Convention
set forth in the First Schedule applies, and
(b) 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.
29 The section states that “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 in corporate in any other country other than India; or
(iii) A company or 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.
30 A. Kumar, R. Upadhyay, A. Jegadeesh & Y.Chheda, Interpretation and Application of the New York Convention in India,

RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS, 445 (ed. G.A. Bermann, 2017).
31 (1961) 1 SCR 809.
32 (1961) 1 SCR 809 ¶66.

9
This above explicated principle was reiterated in different words and in a varied context in
Fatehchand v. State of Maharashtra33, wherein the court deciding the constitutionality of the
Maharashtra Debt Relief Act, 1976 noted the submission of F.S Nariman, who had said while
arguing for money-lending to be considered as a commercial activity “any service or activity which in
the modern complexities of business would be considered to be a lubricant for the wheels of commerce is
‘commercial’”.34

Moving onto greater specificity in case law, the Bombay High Court’s decision in Kamani Engineering
Corporation Ltd. v. Societe De Traction Et D’Electricite Societe Anonyme35 assumes importance because of
how the judge elaborately dealt with scheme of the Arbitration (Protocol and Convention) Act,
1937 while constrictively interpreting the operative phrase of “which are considered as commercial under
the law in force in India”.36 The court said that while it was difficult to find a precise definition to give
meaning to the phrase as neither side has made reference to any law which has defined the terms
“commercial” or “matters commercial”, the legislative intent should be considered. The intent of the
legislature here was simply that in matters involving commercial contracts, recognition must be
accorded to foreign arbitrations and awards and also be enforced. However, since the contract in
question did not involve the defendants entering into business with the plaintiffs and it was only
for technical assistance, it could not be described as commercial. Moreover, it said that since this
contract was exclusively, one of a ‘professional character’, and as a result the ‘commercial reservation
clause’ takes effect and any disputes that emanate from such an agreement cannot be settled
through arbitration.37

Coming to the Supreme Court’s interpretation specifically with ‘commercial’ in relation to

arbitration, it is necessary that we go in a chronological order. In that, Koch Navigation v. Hindustan
Petroleum Corporation Ltd.38 decided by a two-judge bench was an appeal from the judgement and
order of the High Court of Bombay (it refused to enforce the arbitral award) about a dispute arising
out of a charter party contract. The court directed the award to be enforced and while referring to
its discussion in Renusagar Power Co. Ltd. v. General Electric Co.39 said that the [Foreign Awards
(Recognition & Enforcement) Act, 1961] was primarily enacted to give effect to the New York
Convention and was geared towards “speedy settlement of disputes arising from international trade through

33 (1977) 2 SCC 670.

34 (1977) 2 SCC 670, 677 ¶12.
35 1963 SCC OnLine Bom 82.
36 Sec. 3, Arbitration (Protocol and Convention) Act, 1937.
37 1963 SCC OnLine Bom 82, 765 ¶14.
38 (1989) 4 SCC 259.
39 (1984) 4 SCC 679.

10
arbitration”40 for the promotion of international trade and therefore, “any expression or phrase occurring
therein should receive, consistent with its literal and grammatical sense, a liberal construction”.41

In, R.M Investment and Trading Co. Pvt. Limited v. Boeing Co.42, the court was deciding the special leave
petition preferred by the petitioner and it upheld the ruling of the Calcutta High Court in which,
the High Court had said that the agreement to provide technical consultancy services by RMI to
Boeing meant that they stood in relationship that was ‘commercial’ with each other. Further, while
referring to ‘commercial’ in mentioned in the Act43 it said, that the expression must be given a wide
construction, keeping in mind the multiplicity of activities that are considered to be integral to
international trade. Also, that “while construing the expression aid can also be taken from the Model Law
prepared by UNCITRAL wherein relationships of a commercial nature include ‘commercial representation or
agency’ and ‘consulting’”.44

In the process of documenting the broad interpretation of the court, it would be incomplete if
Sundaram Finance v. NEPC India Ltd.45 was not included because of the value of contemporaneity
and in how it explicitly referred to the object and reasons of the model law and the General
Assembly resolution (mentioned earlier) for reinstating the necessity of an expansive construction.
Further, it also distinguished between the Arbitration and Conciliation Act, 1996 and its
predecessor - the Arbitration Act, 1940 and therefore require to be “interpreted and construed
independently and in fact reference to the 1940 Act may actually led to misconstruction…In order to get help in
construing these provisions, it is more relevant to refer to the UNCITRAL Model Law rather than the 1940
Act”.46

The most recent case with respect to the ‘commercial reservation clause’ is Comed Chemicals Limited
v. C.N Ramchand.47 The court was deciding the maintainability of the application before the
Supreme Court under Sec. 11 of the Arbitration and Conciliation Act, 1996 of an agreement
between the parties, in which the respondent supplied technical expertise on a payment of an
amount as ‘fees’ by the petitioner. This issue was reinforced by the submission of the respondent
by referring to earlier rulings of the Supreme Court inter alia in Harendra H. Mehta v. Mukesh
H.Mehta.48 In its judgement rendered by a single-judge bench, it introduced a new test for bringing

40 (1989) 4 SCC 259, 262 ¶8.

41 (1984) 4 SCC 679, 724 ¶50.
42 (1994) 4 SCC 541.
43Foreign Awards (Recognition and Enforcement) Act, 1961.
44 (1994) 4 SCC 541, 542 ¶12-14.
45 (1999) 2 SCC 479.
46 (1999) 2 SCC 479, 482 ¶8-9.
47 (2009) 1 SCC 91.
48 (1999) 5 SCC 108.

11
professional services under the auspice of ‘commercial’49 and said, “if the nature of the work undertaken
by the respondent is such that, it is inextricably linked with functions which could be undertaken by a businessman
or by a Company and such activities form integral part of his activities, there is element of commerce.” 50However,
it refused to extend ‘commerce/commercial’ to every form of contracts regarding employment
matters explicitly stating that “if the contract is merely that of a employee-employment or master-servant, then
the matter cannot be referred to an Arbitration Tribunal”.51

IV. CONCLUSION

This paper was an attempt to bring out an elaborate legislative history of the New York
Convention and from that effectively analyse its interface with India as a Contracting State and
through the Supreme Court’s and various High Court(s) interpretation specifically with regards to
the ‘Commercial Reservation Clause’.

In that, the paper also holds considerable weight because of the comprehensiveness of the study
in highlighting the significance of ensuring uniformity in the system of Arbitration existing in
individual countries followed through national legislations. Especially, bearing in mind the
importance of staying in harmony with the international regime and it being a necessary pre-
requisite for ensuring a proper transition to a market economy. That said, the Government of
India has recently enacted ‘The Commercial Courts, Commercial Division and Commercial
Appellate Division of High Courts Act, 2015’ which inter alia defines ‘commercial disputes’ in a
very wide-ranging manner. Although, there exists a deep-seated scepticism within the business and
trading community with litigation courts, this effectiveness of this newly created set up remain to
be seen.

However, this is not to minimise the importance of ensuring a robust international commercial
arbitration mechanism for India to create an open and free investor friendly market. Also, that the
courts ought to continue interpreting the Arbitration and Conciliation Act expansively (following
from Comed Chemicals) because it is only through this collective progressive process that the flower
of international commercial arbitration in India can fully bloom.

49 G. Bhatia & V. Mahapatra, Supreme Court on the ‘Commercial’ Clause under the Arbitration Act (January 26, 2009),
INDCORPLAW available at https://indiacorplaw.in/2009/01/supreme-court-on-commercial-clause.html.
50 (2009) 1 SCC 91, 99 ¶25.
51 (2009) 1 SCC 91, 99 ¶26.

12
 BIBLIOGRAPHY

Articles

1. A.J van den Berg, Convention on the Recognition and Enforcement of Foreign Arbitral Awards,
UNITED NATIONS AUDIOVISUAL LIBRARY OF INTERNATIONAL LAW (2008).
2. A. Kumar, R. Upadhyay, A. Jegadeesh & Y.Chheda, Interpretation and Application of the New
York Convention in India, RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL
AWARDS, (ed. G.A. Bermann, 2017).
3. E. Lorenzen, Commercial Arbitration – International and Interstate Aspects, YALE LAW JOURNAL,
(1933-1934).
4. F.S Nariman, Application of the New York Convention in India, 25(6) JOURNAL OF

INTERNATIONAL ARBITRATION, (2008).

5. G. Bhatia & V. Mahapatra, Supreme Court on the ‘Commercial’ Clause under the Arbitration Act
(January 26, 2009), INDCORPLAW.
6. J.D Fry, Military-related disputes before the PCIJ and the ICJ, LEGAL RESOLUTION OF NUCLEAR
NON-PROLIFERATION DISPUTES, (2013).

7. M. Pryles, Reservations Available to Member States: The Reciprocal and Commercial Reservations,
ENFORCEMENT OF ARBITRATION AGREEMENTS AND INTERNATIONAL ARBITRAL
AWARDS: THE NEW YORK CONVENTION IN PRACTICE (E.Galliard, D.Di Pietro eds.,
2008).

Books

1. A.J Van den Berg, THE NEW YORK ARBITRATION CONVENTION OF 1958 (1981).
2. Dr. P.C Markanda, N. Markanda, R. Markanda, LAW RELATING TO ARBITRATION AND
CONCILIATION (8th ed. 2013).
3. ENFORCEMENT OF ARBITRATION AGREEMENTS AND INTERNATIONAL ARBITRAL
AWARDS: THE NEW YORK CONVENTION IN PRACTICE (E.Galliard, D. Di Pietro eds.,
2008).
4. G. Born, INTERNATIONAL COMMERCIAL ARBITRATION: COMMENTARY AND MATERIALS,
(2nd ed. 2015).
5. J.D, Fry, Legal RESOLUTION OF NUCLEAR NON-PROLIFERATION DISPUTES, 212 (2013).
6. Justice R.S Bachawat, LAW OF ARBITRATION & CONCILIATION (INCLUDING
INTERNATIONAL COMMERCIAL ARBITRATION & ADR) (1st ed. 2010).
7. RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS, (ed. G.A. Bermann,
2017).

13
Case Laws
1. Atiabari Tea Co.Ltd. v. State of Assam, (1961) 1 SCR 809 (Supreme Court of India).
2. Comed Chemicals Limited v. C.N Ramchand, (2009) 1 SCC 91 (Supreme Court of India).
3. European Grain and Shipping Ltd. v. Bombay Extractions(P) Ltd AIR 1983 Bom 86 (High
Court of Bombay)
4. Fatehchand v. State of Maharashtra, (1977) 2 SCC 670 (Supreme Court of India).
5. Gas Authority of India Ltd. v. Spie Capag SA, 1993 SCC OnLine Del 561, 571 (High Court
of Delhi).
6. Harendra H. Mehta v. Mukesh H.Mehta, (1999) 5 SCC 108 (Supreme Court of India).
7. India Organic Chemicals, Ltd. v. Chemtex Fibres Inc., 1977 SCC OnLine 140 (High Court
of Bombay).
8. Island Territory of Curaco v. Solitron Devices, Inc., 489 F.2d 1313 (United States Court
of Appeals, Second Circuit).
9. Josef Meisaner GMBR & Co. v. Kanoria Chemicals & Industries Ltd., 1985 SCC OnLine
Cal 98 (High Court of Calcutta).
10. Kamani Engineering Corporation Ltd. v. Societe De Traction Et D’Electricite Societe
Anonyme, 1963 SCC OnLine Bom 82 (High Court of Bombay).
11. Kaverit Steel v. Kone Corp ABCA 7 (Court of Appeal of Alberta, Canada).
12. Koch Navigation v. Hindustan Petroleum Corporation Ltd, (1989) 4 SCC 259 (Supreme
Court of India).
13. R.M Investment and Trading Co. Pvt. Limited v. Boeing Co., (1994) 4 SCC 541 (Supreme
Court of India).
14. Renusagar Power Co. Ltd. v. General Electric Co, (1984) 4 SCC 679 (Supreme Court of
India).
15. Sundaram Finance v. NEPC India Ltd, (1999) 2 SCC 479 (Supreme Court of India).
16. Trevino Hernandez v. Smart & Final Inc. 09-cv-2266 BEN (District Court, Southern
California, United States of America).
17. Union of India v. Lief Hoegh, 1982 SCC OnLine Guj 57 (High Court of Gujarat).
18. West Plains Company v. Northwest Organic Community Mills Co-Operative Ltd., 2009
SKQB 162 (Queen’s Bench for Saskatchewan).

14
Domestic Legislations

1. Arbitration (Protocol and Convention) Act, 1937.

2. The Arbitration Act, 1940.
3. The Arbitration and Conciliation Act, 1996.
4. The Foreign Awards (Recognition and Enforcement) Act, 1961.
5. The Commercial Courts, Commercial Division and Commercial Appellate Division of
High Courts Act, 2015

International Instruments/Documents

1. Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10,
1958, 330 U.N.T.S 3
2. International Chamber of Commerce, Enforcement of International Arbitral Awards – Report
and Preliminary Draft Convention, ICC Brochure No. 174 (1953) also available at UN DOC
E/C.2/373.
3. Summary Record of the Twenty-third Meeting, 7,12, UNITED NATIONS CONFERENCE ON

INTERNATIONAL COMMERCIAL ARBITRATION E/CONF.26/SR.23

4. The Geneva Convention on the Execution of Foreign Awards of 1927, 92 League of
Nations Treaty Series 301.
5. The Geneva Protocol on Arbitration Clauses of 1923, July 28, 1924, 27 League of Nations
Treaty Series 157.
6. UNCITRAL Model Law on International Commercial Arbitration, General Assembly
resolution 61/33 of 4 December 2006
7. UNCITRAL Model Law on International Commercial Arbitration, UN DOC A/40/17,
annex I and A/61/17, annex I), on 21 June 1985.
8. United Nations General Assembly Resolution 40/72 on December 11, 1985.

15