ICA OPEN BOOK

Yedu Krishna R B
1113

Can two Indian parties chose a foreign seat for arbitration and completely oust the
jurisdiction of the Indian Courts? Refer to the amendments and case laws in this regard.

The Indian Arbitration and Conciliation Act, 1996 makes it clear that arbitration between an
Indian and a foreign party can be governed by foreign law and can have a foreign seat. This is
defined as ‘international commercial arbitration’ under the Act. However, whether two Indian
parties can agree to a foreign seat for arbitration is not expressly addressed by the Act. A number
of judicial decisions have discussed this proposition.
In BALCO vs Kaiser a Constitution Bench of the SC held that in foreign seated arbitrations Part
I of the Arbitration Act 1996 would not apply and Indian Courts are ousted of all jurisdiction to
intervene in the Arbitration proceedings and Courts are only vested with the powers expressly
granted to it under Part II for the enforcement of awards rendered in a foreign seat. By doing so
the court has affirmed the territoriality principle
The question whether two Indian parties can opt for a foreign seat of arbitration was discussed by
the Delhi HC in GMR Energy Limited vs. Doosan Power Systems India Private Limited. In
BALCO the Court held Section 2(1)(f) of the Arbitration Act, which defines an ICA, is relevant
only as far as Section 28 of the Act is concerned which provides that in arbitration agreements
other than ICA the substantive law shall be the law for the time being in force in India i.e Indian
parties are legally precluded from applying any other substantive law and clause (2) which
provides for the applicable substantive law in where arbitration agreement is an ICA.
Not all the amendments have been incorporated in the 1996 Act. Inclusion of the words “seat”
and “venue” would have further established the proposition laid down in BALCO, safeguarding
the interpretation from further scrutiny and adverse interpretations. The Amendment Act has,
however, incorporated the proviso to Section 2(2) suggested by the amendment. Inclusion of the
proviso does not fundamentally alter the nature of the 1996 Act, which, as per BALCO is a seat-
centric legislation. Having granted the parties the autonomy to choose to retain the jurisdiction of
Indian courts, the amendment has redressed the lacuna that existed in the 1996 Act. The parties
involved in foreign seated international commercial arbitrations can file proceedings under
Section 9 in order to secure the assets which may be necessary to realize their claims.
The Supreme Court in its judgment Enercon (India) Ltd. v. Enercon, The court reiterated and
further established the law lay down by BALCO. Enercon clarified the position of law in case
the parties have failed to or improperly mentioned the law applicable to the arbitration
agreement.
In BALCO an argument was raised that since two Indian parties cannot opt out of the substantive
law of the country they would equally be precluded from opting out of procedural arbitration
law. However, the contention that two Indian parties conducting a foreign seated arbitration
would be against public policy in Section 23 of the Indian Contract Act read with Section 28,
was rebutted by the SC in Atlas Export Industries vs. Kotak & Co, and held that merely because
the arbitrators are situated in a foreign country cannot by itself be enough to nullify the
arbitration agreement when the parties have with their eyes open willingly entered into the
agreement and such agreements are covered under the Exception to Section 28.
The Supreme Court in TDM Infrastructure Private Limited v. UE Development India Private
Limited1  held that it is inconsistent with Indian public policy for an Indian incorporated entity to
contract out of the application of Indian substantive law in a contract that it enters into with
another Indian incorporated entity. This is despite the fact that such a contract may contain a
foreign-seated arbitration clause. The Court held in this case that it appeared to be the
legislature's intention that Indian nationals should not be permitted to derogate from Indian law
as this is part of the public policy of India. The decision in TDM Infrastructure was followed by
the Bombay High Court in Addhar Mercantile Private Limited v. Shree Jagdamba Agrico
Exports Pvt. Ltd. (Addhar Mercantile)2. In this case, the High Court directed the arbitrating
Indian parties to conduct their arbitration in India with Indian law as the substantive law of the
contract even though the parties had contractually agreed to an "arbitration in India or
Singapore" with English law as the substantive law
The rule in TDM infrastructure was held to be as non-binding when it came under consideration
in the case of. Sasan Power Ltd. v. North American Coal Corpn. India (P) Ltd 3. In Sasan, the
Madhya Pradesh High Court reached an opposite conclusion from that of Addhar, by holding

1
(2008) 14 SCC 271
2
2015 SCC OnLine Bom 7752.
3
(2016) 10 SCC 813.
that the Indian parties are free to choose a foreign seat. the Madhya Pradesh High Court
concluded that the observations of TDM Infrastructure were non-binding as they were only for
the purpose of determining the jurisdiction under section 11 of the Act.
Therefore, it can be implied that there still exist uncertainties with this regard. However, Section
28 of the 1996 Act can be said not to be a bar on Indian parties to have foreign seat for their
arbitration, firstly, because the condition precedent for the applicability of the provision is that
the seat of arbitration should be in India and Secondly, the provision deals with “substantive
law” (and not curial law). By choosing to have a foreign seat for their arbitration, Indian parties
do not influence the “substantive law” applicable; it merely determines the curial law.

Company A, a foreign co has 30% equity in an Indian Company, B, that was awarded 2G
licences by the government of India. Owing to the 2G scam, all the license were cancelled
by the Supreme Court of India. B Company approached TSAT for recovering the licence
fee, which was not granted. A few shareholders in co B were charged for cheating and
criminal conspiracy for attaining licence though they were later acquitted by the CBI.
There was a BIT between the country of company A and India, and an article for
compensation in the BIT was invoked by the company A, where in an arbitration
proceedings was to be initiated. The B Company filed a suit before the Supreme Court of
India, seeking to stay the BIT- arbitration proceedings. As the legal counsel for Company B
advice the company.

In the case, the series of unfortunate events that lead to losses as sustained by Company A was
not due to the fault on behalf of Company B. As can be seen, the Supreme Court of India had
cancelled the licenses of several companies in the wake of 2G Scam, and Company B happened
to be one of them. The company even had tried to recover its licensing fees, but in vain. The
shareholders of company B alleged to have committed cheating were also acquitted in due
process of law. Hence the losses sustained by Company A can in no way be attributed to be
arising out of fault by company B. These losses would amount to Expropriation provided under
the BITs Model Law of India, which could be duly compensated.
However, it is an accepted principle that Investments of investors of either Contracting Party in
the territory of the other Contracting Party shall not be nationalised, expropriated or subjected to
measures having effects equivalent to nationalisation or expropriation except for public purposes
under due process of law, on a non-discriminatory basis and against fair and equitable
condensation. In other words, compensation to be made for expropriation depends upon the
legality of such expropriation. Majority treaties have envisaged essential criteria to determine
legality of expropriation, namely that the measure must be taken in light of a public purpose, it
must be non- discriminatory, must be in accordance with due process of law.
Therefore, in the instant case since the cancellation of licensing by the Supreme Court in the
wake of 2G scam would amount to an act by the State in the interest of public policy, the losses
sustained by Company A would amount to legal expropriation, which is not liable to be
compensated.
Furthermore, an anti-arbitration injunction stays the arbitration proceedings and restores the
parties to the position where the suit does not potentially become infructuous, unconscionable or
oppressive. In The Calcutta High Court judgment The Board of Trustees of the Port of Kolkata v.
Louis Dreyfus Armatures SAS4 it was observed that unless the facts and circumstances of a
particular case demonstrate that the continuation of such foreign arbitration would cause
“demonstrable injustice”, a civil court in India would not exercise its jurisdiction to stay the
foreign arbitration.
The Court had laid down three circumstances under which an anti-arbitration injunction can be
granted:
1. If an issue is raised whether there is any valid arbitration agreement between the parties and
the Court is of the view that no agreement exists between the parties;
2. If the arbitration agreement is null and void, inoperative or incapable of being performed; or
3. Continuation of foreign arbitration proceeding might be oppressive or vexatious or
unconscionable.
In the case Union of India v. Khaitan Holdings 5, the same principle was laid down by the Delhi
High Court that, an Indian court could intervene in an investment arbitration and grant an anti-
arbitration injunction only if the arbitration is “oppressive, vexatious, inequitable or constitutes
an abuse of the legal process”. This principle was laid down for the first time in Union of India
v. Vodafone Group.6In the instant case, if any arbitration proceeding is initiated by Company A,

4
 G.A. 1997 of 2014 
5
CS (OS) 46/2019 I.As. 1235/2019 & 1238/2019 dated January 29, 2019
6
CS(OS) 383/2017
the same would result in an oppressive and vexatious litigation for Company B, since Company
B is essentially at no fault for the misfortunate events.

Discuss the position of non- signatories to an arbitration agreement with respect to an

arbitration proceeding in India.

The concept of a company as a separate legal entity with its own juristic personality and separate
existence different from its shareholders have been recognized as one of the fundamental
principles of company law ever since the unanimous decision of the House of Lords in Salomon
vs Salomon, 1896. The Doctrine of Lifting the Corporate Veil is a an exception to the rule of a
company as a separate legal entity
In Renusagar Power Co. Ltd vs General Electric Co the Court allowed the lifting of the corporate
veil and joined HINDALCO the parent company of Renusagar to the arbitration proceeding
because the facts and circumstances reveal that both the legal entities were operating as once
concerned. Citing LIC vs Escorts wherein the Court stated corporate veil should be lifted where
the associated companies are inextricably connected as to be, in reality, part of one concern.
The Indian law pertaining to the position of non-signatories has evolved drastically over the
years. The Supreme Court of India considered the position of non-signatories to arbitration
7
agreements for the first time in Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya &Anr. The
Bombay High Court had rejected an application filed under section 8 of the Act by Sukanya
Holdings in view of the fact that not all the parties were signatories to the arbitration agreement.
The Court remarked that arbitration was a viable option only as against some of the parties and
the Act did not confer any power on the judiciary to add non-signatories to arbitration
agreements. On appeal as well, the matter was dismissed and it was held that Section 8 of the Act
would not be applicable to a matter which lies outside the arbitration agreement and is also
between some of the parties who are not parties to the arbitration agreement.
In Indowind Energy Ltd. v. Wescare (I) Ltd. &Anr 8the Supreme Court followed the ruling in
Sukanya Holdings case and held that the existence of an arbitration agreement between the
parties to the dispute and covering the dispute was fundamental to the invocation of arbitration.
The Supreme Court did not provide any leeway to the parties to extend the operation of an
7
A.I.R. 2003 S.C. 2252
8
(2010) 5 S.C.C. 306
arbitration agreement to non signatories, save and except for arbitration agreements incorporated
by reference.
The Supreme Court of India has applied the Sukanya Holdings’ reasoning even when deciding
petitions under Section 45 of the Act, which pertains to the enforcement of arbitration
agreements under the NYC i.e. in cases of international commercial arbitration. In Sumitomo
Corporation v. CDS Financial Services9, the Supreme Court declined to refer non signatories to
arbitration stating that any reference to arbitration necessarily had to be between parties as
defined by Section 2(1)(h) of the Act. However this decision has been criticised for the
inconsistency it brings between the wordings of section 45 itself which provides for reference to
arbitration upon a request of ―one of the parties or any person claiming through or under him
and Section 2(1)(h).
In Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc. & Ors.10 the SC
adopted the group companies’ doctrine.The group of companies doctrine is an important
development where the separate entity status of a company was set aside and a company’s parent
company or sister affiliates could be made a party to an arbitration agreement even though they
are non-signatories if the circumstances indicate that there was a clear mutual intention of the
parties to bind both, the signatory as well as the non-signatory parties. In other words, 'intention
of the parties' is a very significant feature which must be established before the scope of
arbitration can be said to include the signatory as well as the non-signatory parties. However, a
heavy onus lies on the party seeking to claim under or through the principle of alter ego a non-
signatory party to arbitration and the applicants cannot get away by showing that only a prima
facie view has to be formed.
A non-signatory or third party could be subjected to arbitration without their prior consent, but
this would only be in exceptional cases of composite agreements where there is commonality of
the subject matter and where the non-signatory party has a significant bearing on the transaction.
Besides all this, the court would have to examine whether a composite reference of such parties
would serve the ends of justice.
In Chloro Controls Supreme Court recognized the legal basis to bind a non-signatory to an
arbitration agreement which inter alia are implied consent, third party beneficiary, guarantors,
assignment or other transfer mechanism of control/rights, apparent authority, pier cing of veil,
9
A.I.R. 2008 S.C. 1594
10
(2013) 1 SCC 641
agent principal relationship, agent vendor relations etc. This ratio in the Chloro controls case
was made applicable to domestic arbitration as well, which lead to the subsequent amendment of
the Act. The Arbitration and Conciliation (Amendment) Act, 2015 brought changes to Section 8,
whereby the words 'a party to the arbitration agreement or any person claims through or under
him' were included to replace the word 'party’. A landmark judgement with regard to
interpretation of section 8 post the 2015 Amendment was Ameet Lalchand Shah and Ors. v.
Rishabh Enterprises and Ors.11, wherein the Supreme Court was faced with the question
whether, post the amendment of the Act, non-signatory parties could be referred to a single
composite domestic arbitration, when such parties had entered into several contracts with each
other (not all of which contained arbitration clauses also) in connection with the execution of the
same project. Therefore, Sukanya Holdings though not overruled, may have very limited
applicability in similar fact scenario, and may only be used to test whether all the parties sought
to be referred to a composite arbitration are necessary parties, or whether the arbitration
agreement itself is bad in law.

Examine the difference between the 1996, 2015, and 2019 amendment Acts. How have the
2015, and 2019 amendments been a positive step with respect to international commercial
arbitrations.
The Arbitration and Conciliation Act, 1996 improves upon the previous laws regarding
arbitration in India namely the Arbitration Act, 1940, the Arbitration (Protocol and Convention)
Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961.Further, the new
statute also covers conciliation which had not been provided for earlier.The Act also derives
authority from the UNCITRAL Model law on International Commercial Arbitration and the
UNCITRAL rules on conciliation.The Model law on International Commercial Arbitration was
framed after taking into consideration provisions regarding arbitration under various legal
systems. Thus, it is possible to incorporate the model law into the legal system of practically
every nation.The Act of 1996 aims at consolidating the law relating to domestic arbitration,
international commercial arbitration, enforcement of foreign arbitral awards and rules regarding
conciliation.

11
(2018) 15 SCC 678.
Amendments in 2015 in many ways is intended to reduce the supervisory role of the Courts.
Given below are some of the amended provisions intended to reduce the supervisory role of the
Indian Courts.: 2015 Act empowers only State High Court to intervene in matters of international
commercial arbitration under its ordinary original civil jurisdiction and appellate jurisdiction if
the same has been the subject matter of a suit. This apart, a newly added proviso to section 2(2)
states that the provisions of sections 9, 27 and 37(1) (a) and (3), subject to an agreement to the
contrary, “shall also apply to international commercial arbitration, even if the place of arbitration
is outside India, and an arbitral award made or to be made in such place is enforceable and
recognized under the provisions of part II of the 1996 Act”. But the operation of the proviso is
made contingent upon the existence of an agreement to the contrary.
The amended SECTION 9 empowers the Court to pass interim measures on the application of a
party. This application, however, has to be filed before or during arbitral proceedings or at any
time after the making of the arbitral award but before enforcement in accordance with section
36.Amended SECTION 11 assures the autonomy of the parties by according freedom to the
parties to appoint arbitrators of their choice of any nationality. Parties are further given freedom
to decide on the procedure for appointing the arbitrators.
The amended SECTION 17 slashes the power of the Court to entertain applications during the
arbitral proceedings or at any time after making of the arbitral award but before its enforcement
in accordance with section 36, for the specific cases mentioned therein.Section 34 which deals
with the ‘application for setting aside arbitral award’ is one provision which the parties to an
international arbitration often resorted to for setting aside the arbitral award. The State High
Courts and Supreme Court used to entertain such applications under section 34 at the instance of
the losing party. In the absence of a precise definition, the expression ‘opposed to the public
policy of India’ became a constant source of abuse and led to conflicting judicial decisions. With
a view to set at rest the conflicting situation, explanations (1) and (2) were added to section 34
which are more in the nature of clarifications.
The 2019 Amendment Act, is evidently a step-in furtherance of making India an arbitration-
friendly jurisdiction.The Government had initiated these efforts in 2015 with The Arbitration and
Conciliation (Amendment) Act, 2015 ("the 2015 Amendment Act") which was the initial step
taken to amend The Arbitration and Conciliation Act, 1996 ("the Act"). Now in 2019, to further
strengthen and make the arbitration process user friendly, cost-effective and time bound, the
Government has introduced the 2019 Amendment Act. it broadly deals with three aspects of
Indian Arbitration:
 1. Reduce Court’s involvement in Arbitration: The introduction of the 2019
Amendment Act has reduced the judicial intervention, whereby appointment of
arbitrators will now be done by Arbitral Institutions.
 Address issues arising out of 2015 Amendment Act (e.g. amendment to Section 23,
29A): In order to make India a more robust market for foreign investors and a
preferred seat for arbitration, two issues which are now sought to be addressed by the
2019 Amendment Act, is that: (i) Parties are now required to complete their pleadings
within six months from the date of service of written notice to the arbitrator (section
23)
 The 2015 Amendment Act had introduced a time-limit of 12 months (extendable to
18 months with the consent of parties) for the completion of arbitration proceedings
from the date the arbitral tribunal enters upon reference. 2019 Amendment Act
(Section 29A) now seeks to change the start date of this time limit of passing an
award from the date on which statement of claim and defence are completed by
parties. In International arbitrations the Amendment Act 2019 gives a relaxation to
the mandatory time period of one year of passing the award.
 .The other key amendment is the amendment to Section 11. Section 11 of Arbitration
Act inter alia provides for appointment of the Arbitral Tribunal through Courts when
parties fail to constitute the Arbitral Tribunal under the Arbitration Agreement.
 The amendment brought to the 1996 Act is certainly a positive step towards making
arbitration expeditious, efficacious and a cost effective remedy. The new amendments
seek to curb the practices leading to wastage of time and making the arbitration
process prohibitively a costly affair. The new law also makes the declaration by the
arbitrator about his independence and impartiality more realistic as compared to a
bare formality under the previous regime.
Will an award be automatically stayed if a challenge is made to it under Section 34. Discuss
the position of law in the light of recent changes.
Pursuant to Section 36 of the Arbitration and Conciliation Act, 1996 (‘1996 ACA’), on the filing
of a setting aside application under Section 34, the arbitral award could be enforced only after
the Section 34 petition was rejected. Consequently, any challenge to an award of the arbitral
tribunal rendered it unexecutable. In light of the same, in the case of National Aluminum
Company Ltd. v. Pressteel & Fabrications Ltd. and Anr, 12 the Supreme Court interpreted Section
34 of the 1996 ACA to allow for an automatic stay of an arbitration award on the filing and
pendency of an application for setting aside of an award.
With the Arbitration and Conciliation Amendment Act 2015 (‘2015 ACA’), Section 36 of the
1996 ACA was amended, which did away with the automatic stay provisions. Accordingly, the
award debtor was required to make an application seeking a stay. However, there was persistent
ambiguity among various High Courts in India over the applicability of the 2015 ACA
provisions. In BCCI vs Kochi13 the SC held that the 2015 Amendments would be applicable
prospectively except for Section 34 which would be applied retrospectively since the right under
Section 34 was not a vested right. In addition the scheme of the arbitration Act postulated the
purpose of the Arbitration Act was speedy and efficient settlement of disputes and applying
Section 34 prospectively would be against the whole scheme of the Arbitration Act. As per the
amendment a mere application under S 34 would not grant an automatic stay on enforcement
unless a separate application asking for a stay is made and granted by the Court.
However 2019 Amendments further changed this position by introducing a new Section 87,
which provided that (unless the parties agreed otherwise) the 2015 Amendments would apply
prospectively to all arbitral and court proceedings commenced after October 23, 2015, and not
otherwise. This was challenged before the SC in Hindustan Construction Company vs. U.o.I14
Subsequently, the Supreme Court declared that its interpretation in NALCO of the un-amended
Section 36 of the Arbitration Act as providing for an automatic stay was bad in law. The
Supreme Court also declared Section 87 of the Arbitration Act unconstitutional and restored the
position as interpreted in BCCI.

The immediate consequence of the judgment in Hindustan Construction was that the automatic stay
rule would no longer available, irrespective of whether the arbitration proceedings in which an award is
issued commenced prior to or after the Effective Date.

12
(2004) 1 SCC 540
13
(2018) 6 SCC 287
14
(Writ Petition (Civil) No. 1074 of 2019)
What is institutional arbitration? If a party chooses institutional arbitration, and also
chooses a seat of arbitration, what is the law that will be applied? Forum non convenience
and choice of law issues. Discuss
Russell on Arbitration states while ad hoc arbitration is advantageous in that it helps parties
customize procedures and timetables based on the dispute on hand, institutional arbitration offers
a variety of services in the conduct of proceedings. They act as administrators appointing
arbitrators etc and play a supportive role by way of court intervention, in helping out in ways
outside the arbitrator’s jurisdiction like collecting evidence, passing certain kinds of interim
reliefs etc. They also prescribe certain mandatory rules which the parties are required to abide by
thereby providing an overall framework for the conduct of arbitration. These rules being a self-
contained or a self-regulating code, they operate more or less independently of judicial
interference in the conduct of arbitration, except insofar as they conflict with the mandatory
requirements of the governing system.
International Arbitration also raises queries regarding where the seat of arbitration is and whether
the place chosen is the seat or a venue. When neither the choice of procedural law nor the seat of
the arbitration is specified, the Courts will determine the seat of arbitration by looking at the
agreement and all other relevant circumstances.
In Yograj Infrastructure Ltd. v. Ssangyong Engineering & Construction Co. Ltd, 2011, the law
governing the contract was Indian law while the curial law was Singapore Law and SIAC Rules.
The question which arose was what was the law that would govern the arbitration agreement, the
Court held that in the absence of any other stipulation in the arbitration clause as to which law
would apply in respect of the arbitral proceedings, it is now well settled that it is the law
governing the contract which would also be the law applicable to the Arbitral Tribunal itself.
However later in Yograj Infrastructure Ltd. v. Ssangyong Engg. & Construction Co. Ltd, 2012
the Court clarified that Singapore being the seat of arbitration the Curial law would be SIAC
rules and Singapore Arbitration Act would be the law of arbitration. This marked a shift where
the law of arbitration was not agreed the Courts from applying the substantive law of the contract
as the law of arbitration shifted to applying the law of the seat of arbitration as the law of
arbitration by default.
In IMAX Corporation (supra) Supreme Court held The relationship between the seat of
arbitration and the law governing arbitration is an integral one. The seat of arbitration is defined
as the juridical seat of arbitration designated by the parties, or by the arbitral institution or by the
arbitrators themselves, as the case may be. It is pertinent to refer to the following passage from
Redfern and Hunter on International Arbitration [Redfern and Hunter on International
Arbitration, 5th Edn. (Oxford University Press, 2009)] :
When one says that London, Paris or Geneva is the place of arbitration, one does not refer solely
to a geographical location. One means that the arbitration is conducted within the framework of
the law of arbitration of England, France or Switzerland or, to use an English expression, under
the curial law of the relevant country. The geographical place of arbitration is the factual
connecting factor between that arbitration law and the arbitration proper, considered as a nexus
of contractual and procedural rights and obligations between the parties and the arbitrators.
. In the case of BNA v. BNB15 , Singapore International Arbitration Centre (SIAC) for arbitration
in Shanghai decided that where there is a conflict between the seat of arbitration and contractual
law, the Sulamerica principle should be used and in this case the seat of arbitration was
considered as the governing law. In the case of Enercon (India) Ltd and Ors v Enercon16 , a
dispute regarding seat of arbitration and venue of arbitration was settled. The Supreme Court
applied closest and most real connection and decided that seat of arbitration will survive.
According to the doctrine of Forum Non Conveniens, a court can in exercise of its inherent
power decline to exercise jurisdiction in a case brought before it, on the basis that a court in
another jurisdiction is the more appropriate venue for the trial of the matter. The doctrine thus
involves the dismissal of a case because the forum chosen by the plaintiff is so completely
inappropriate and inconvenient that it is better to stop the litigation in the place where brought
and let it start all over again somewhere else. The purpose of the Forum Non Conveniens,
doctrine is to make trials easy, expeditious and inexpensive. In Gulf Oil Corp. v. Gilbert17,The
court held that the defendants must demonstrate that there exists an adequate alternative forum
for the litigation. If they fail to make this showing, the court’s inquiry stops, and the case will not
be dismissed under the doctrine. This doctrine can be employed to prevent forum shopping
which may not be conducive to doing justice between the parties.

15
[2019] SGCA 84 [2012]
EWHC 42 (Comm); [2012] EWCA Civ 638
16
SLP (C) No. 10924 of 2013
17
330 U.S. 501 (1947)
The Monde Re 18and Figueiredo Ferraz 19cases are landmark cases in Forum Non Conveniens,
which have implications beyond just the recognition of arbitration agreements. If courts would
follow the same approach in actions to recognize foreign judgments, the impact on future
ratification and implementation of many conventions like 2005 Hague Convention on Choice of
Court Agreements could be affected. Article 5 provides the basic rule for recognition of
exclusive choice of court agreements under the Convention, and then includes an obligation not
to decline jurisdiction when a request for recognition of an agreement is asserted. Thus Forum
Non Conveniens affects the choice of law principle.
Even in the case of Choice Of Law, There are four different choice-of-law issues in international
arbitration that arise: (1) Determination of the substantive law applicable to the merits of the case
(2) Determination of the substantive law applicable to the arbitration agreement (3)
Determination of the procedural law applicable to the arbitral proceedings (4) The conflict of law
rules applicable to determine each of the above-mentioned laws. To resolve these issues, where
parties have failed to agree on a specific governing law, the arbitral tribunal will choose the law
applicable depending on the facts of the case at hand, using criteria such as selecting the law with
the closest connection to the dispute, in other situations law applicable to the arbitration
agreement is often found to be the law of the arbitral seat, sometimes it may also be found to be
the law governing the parties’ contract or international principles. In most cases procedural law
is domestic law and in cases of conflict of law, arbitral tribunal decides the right law applicable.
Forum Non Conveniens, and Choice Of Law if taken together does not always go hand in hand.
When Forum Non Conveniens is used by the court, in most cases it contradicts the principle of
Choice Of Law. Party autonomy is key concept in International Commercial Arbitration.
Acceptance of seat of arbitration over venue of arbitration stems from party autonomy principle.
When the choice of law selected by parties through a formal agreement is made futile by courts
through strict adherence to Forum Non Conveniens, the foundation of commercial arbitration is
affected.

18
158 F. Supp. 2d 377 (S.D.N.Y. 2001)
19
No. 09-3925 (2d Cir. 2011)