THE ICFAI UNIVERSITY

THE ICFAI LAW SCHOOL

DEHRADUN

ASSIGNMENT 3
ON
RELEVANCY OF NEW YORK CONVENTION WITH
RESPECT TO FOREIGN AWARDS IN INDIA

NAME: SMRITI SINGH Submitted to:

E.ID: 17FLICDDN02130 AYUSHI MITTAL
COURSE: BA.LLB(Hons.) Faculty Associate
Batch : 2017-2022 ICFAI Law School
Section : C
Subject ; IBDRM
BACKGROUND OF ENFORCING FOREIGN ARBITRAL AWARDS IN
INDIA
The international commercial activities were in existence to the present era as well. Of
course, its volume and participating units were limited. The advent of industrial revolution
technical and mechanical utilization and information technology explosion have made the
world very small in its reach and transactions have grown enormously between the different
nations. Where there are voluminous and numerous transactions (both at international &
domestic level), it is but natural that there shall be disputes as well. The settle these
international commercial disputes speedy and satisfactorily, as per international norms, in
India there were two separate Acts, namely:
a) The Arbitration (Protocol & Convention) Act, 1937: It was enacted as a result of Geneva
Protocol (1923) & Geneva Convention, 1927 (the GC, 1927) under the auspices of League of
Nations.
b) The Foreign Awards (Recognition & Enforcement) Act, 1961: It was enacted as a result
of the NYC (1958), under the auspices of United Nations Organization.
After the enactment of the Arbitration Act, 1996, the two aforesaid Act stand repealed, and
with certain modifications, their close relevant provisions have been incorporated in Chapter
I with heading ‘Enforcement of Certain Foreign Awards’ and ‘New York Convention
Awards’ and Chapter II with heading “Geneva Convention Awards” respectively of Part II of
the present Act, 1996.
However, the Supreme Court (SC) in Thyssen Sthlunion GMBH v. Steel Authority of
India 1998 has held that there is not much difference in the provisions of the Foreign
Awards (Recognition & Enforcement) Act, 1961 and the Arbitration Act, 1996 regarding
enforcement of the foreign award. The definition of ‘foreign award’ is also same in both the
enactments. The only difference appears to be that while under the Foreign Awards
(Recognition & Enforcement) Act, 1961 a decree follows, whereas under the present
Arbitration Act, 1996, a foreign award is already stamped as the decree.
The Part II of the present Arbitration Act, 1996 contains in Chapter I the primary provisions
of the NYC (1958) which deals and covers both arbitral agreement and awards, having
foreign texture and in Chapter II . Thus part II of the present Arbitration Act, 1996, regulates
the awards made under the NYC (1958) in Chapter I or the GC (1927) in Chapter II for its
enforcement.
Section 52 of the present Arbitration Act, 1996 provides that Chapter I of Part II excludes the
application of Chapter II but Chapter II does not exclude the application of Chapter I.
Excepting Section 52 (in Chapter I) of the Act, 1996, both the Chapters (Chapter I and
Chapter II) consist of 8 Sections each dealing with same issue and wording of the Sections is
also almost the same barring Section 47 of Chapter I and Section 57 of Chapter II which deal
with the enforcement of foreign awards.
OBJECTIVES

The following briefly describes the two basic actions contemplated by the New York
Convention:
a) The recognition and enforcement of foreign arbitral awards, i.e., arbitral awards made in
the territory of another State: This field of application is defined in article I. The general
obligation for the Contracting States to recognize such awards as binding and to enforce them
in accordance with their rules of procedure is laid down in article III. A party seeking
enforcement of a foreign award needs to supply to the court: (a) the arbitral award; and (b)
the arbitration agreement (article IV). The party against whom enforcement is sought can
object to the enforcement by submitting proof of one of the grounds for refusal of
enforcement which are imitatively listed in article V, paragraph
1. The court may on its own motion refuse enforcement for reasons of public policy as
provided in article V, paragraph 2. If the award is subject to an action for setting aside in the
country in which, or under the law of which, it is made (“the country of origin”), the foreign
court before which enforcement of the award is sought may adjourn its decision on
enforcement (article VI). Finally, if a party seeking enforcement prefers to base its request for
enforcement on the court’s domestic law on enforcement of foreign awards or bilateral or
other multilateral treaties in force in the country where it seeks enforcement, it is allowed to
do so by virtue of the so called more-favorable-right-provision of article VII, paragraph 1.

b) The referral by a court to arbitration: Article II, paragraph 3, provides that a court of a
Contracting State, when seized of a matter in respect of which the parties have made an
arbitration agreement, must, at the request of one of the parties, refer them to arbitration.

The influence of the New York Convention on the development of international commercial
arbitration has been phenomenal. The New York Convention solidified two essential pillars
of the legal framework by providing for the obligatory referral by a national court to
arbitration in the event of a valid arbitration agreement and for the enforcement of the arbitral
award. The New York Convention is probably the main reason why arbitration is the
preferred method for the resolution of international business disputes.

PROVISIONS

The New York Convention applies to all arbitral awards rendered pursuant to a written
arbitration agreement in a country other than the state of enforcement. The New York
Convention also applies to arbitral awards not considered as domestic awards by the
enforcing state. The term ‘arbitral award’ is not defined, but includes awards made by ad hoc
tribunals as well as permanent arbitral tribunals. The nationality of the parties is irrelevant for
purposes of the convention. Under Article I (3), contracting states can choose to limit the
application of the convention to arbitral awards rendered in another contracting state or to
awards relating to commercial disputes.

In order to obtain recognition and enforcement of an arbitral award under the New York
Convention, a party has only to supply the enforcing court with a certified copy of the arbitral
award and the arbitration agreement. If an arbitral award is encompassed by the New York
Convention, contracting states must recognize the award as binding and enforce it in
accordance with local rules of procedure. They may not impose more onerous conditions,
higher fees, or charges on the recognition or enforcement of the award than prevail with
respect to domestic arbitral awards.

If a party objects to enforcement, it has the burden of proving that the award should not be
enforced. The objecting party must argue from Article V (1) which provides a list of grounds
for refusing enforcement:
a) Invalidity of the arbitration agreement;
b) Violation of due process;
c) Excess by arbitrator of his authority;
d) Irregularity in the composition of the arbitral tribunal or in the arbitral procedure; and
e) Award not binding, suspended or set aside in the country of origin.

Additionally, the court can refuse to enforce the award under Article V (2) if its subject
matter is incapable of settlement by arbitration under the enforcing country's laws or if
recognition or enforcement of the award would violate the enforcing country's public policy.

THE NEW REGIME

In January 1996, India enacted a new Arbitration Act. This Act repealed all the three previous
statutes (the 1937 Act, the 1961 Act and the 1940 Act).The new Act has two significant parts.
Part I provides for any arbitration conducted in India and enforcement of awards there under.
Part II provides for enforcement of foreign awards. Any arbitration conducted in India or
enforcement of award there under (whether domestic or international) is governed by Part I,
while enforcement of any foreign award to which the New York Convention, is governed by
Part II of the Act.

FOREIGN ARBITRAL AWARDS IN INDIAN LAW:

An Overview of the Provisions in the Arbitration and Conciliation Act

This is covered by Part II of the 1996 Act, though due to a recent Supreme Court decision,
the distinction between the grounds and procedures in Part I and Part II has got blurred. The
provisions of Part II of the Act give effect to the New York Convention .

1. Foreign Award Defined

In order to be considered as a foreign award (for the purposes of the Act), the same must
fulfill two requirements. First it must deal with differences arising out of a legal relationship
(whether contractual or not) considered as commercial under the laws in force in India. The
expression ‘commercial relationship’ has been very widely interpreted by Indian courts. The
Supreme Court in the case of RM Investments Trading Co Pvt. Ltd v Boeing Co & Anor,
1999 while construing the expression ‘commercial relationship’, held:

“The term ‘commercial’ should be given a wide interpretation so as to cover matters arising
from all relationships of a commercial nature, whether contractual or not. The second
requirement is more significant and that is that the country where the award has been issued
must be a country notified by the Indian government to be a country to which the New York
Convention applies.”

The second requirement is more significant and that is that the country where the award has
been issued must be a country notified by the Indian government to be a country to which the
New York Convention applies. Only a few countries have been notified so far and only
awards rendered therein are recognized as foreign awards and enforceable as such in India.

An interesting issue came up before the Supreme Court as to what would happen in a case
where a country has been notified but subsequently it divides or disintegrates into separate
political entities. This came up for consideration in the case of Transocean Shipping
Agency Pvt. Ltd v Black Sea Shipping & Ors.1998 - Here the venue of arbitration was
Ukraine which was then a part of the USSR — a country recognized and notified by the
Government of India as one to which the New York Convention would apply. However, by
the time disputes arose between the parties the USSR had disintegrated and the dispute came
to be arbitrated in Ukraine (which was not notified). The question arose whether an award
rendered in Ukraine would be enforceable in India notwithstanding the fact that it was not a
notified country.
Both the High Court of Bombay (where the matter came up initially) and the Supreme Court
of India in appeal, held that the creation of a new political entity would not make any
difference to the enforceability of the award rendered in a territory which was initially a part
of a notified territory. On this basis the court recognized and upheld the award. This decision
is of considerable significance as it expands the lists of countries notified by the government
by bringing in a host of new political entities and giving them recognition in their new avatar
also. At another level the judgment demonstrates the willingness of Indian courts to
overcome technicalities and lean in favour of enforcement.

CONDITIONS FOR ENFORCEMENT

The conditions for enforcement of a foreign award are as per the New York Convention. The
only addition being an ‘Explanation’ to the ground of public policy which states that an
award shall be deemed to be in conflict with the public policy of India if it was induced or
affected by fraud or corruption.

Indian courts have narrowly construed the ground of public policy in relation to foreign
awards. In Renu Sagar Power Co v General Electrical 1993 , the Supreme Court
construed the expression ‘public policy’ in relation to foreign awards as follows:

“This would mean that ‘public policy’ in s 7(1)(b)(ii) has been used in narrower sense and in
order to attract to bar of public policy the enforcement of the award must invoke something
more than the violation of the law of India. Applying the said criteria it must be held that the
enforcement of a foreign award would be refused on the ground that it is contrary to public
policy if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii)
the interests of India; or (iii) justice or morality.”
ENFORCEMENT UNDER THE NEW YORK CONVENTION
Under the Arbitration and Conciliation (Amendment) Act, 2015. There are two avenues
available for the enforcement of foreign awards in India, viz., the New York Convention.
Sections 44 to 52 of the Arbitration and Conciliation (Amendment) Act, 2015 deals with
foreign awards passed under the New York Convention.
The New York Convention defines "foreign award" as 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.

From the abovementioned conditions, it is clear that there are two pre-requisites for
enforcement of foreign awards under the New York Convention. These are:
a. The country must be a signatory to the New York Convention.
b. The award shall be made in the territory of another contracting state which is a
reciprocating territory and notified as such by the Central Government.

Section 47 provides that the party applying for the enforcement of a foreign award shall,
at the time of the application, produce before the court (a) original award or a duly
authenticated copy thereof; (b) original arbitration agreement or a duly certified copy
thereof; and (c) any evidence required to establish that the award is a foreign award. As
per the new Act, the application for enforcement of a foreign award will now only lie to
High Court.

Once an application for enforcement of a foreign award is made, the other party has the
opportunity to file an objection against enforcement on the grounds recognized under
Section 48 of the Act. These grounds include:
a. the parties to the agreement referred to in section 44 were, under the law applicable
to them, under some incapacity, or the said agreement is not valid under the law to
which the parties have subjected it or, failing any indication thereon, under the law
of the country where the award was made; or
b. the party against whom the award is invoked was not given proper notice of the
appointment of the arbitrator or of the arbitral proceedings or was otherwise unable
to present his case; or
c. the award deals with a difference not contemplated by or not falling within the terms
of the submission to arbitration, or it contains decisions on matters beyond the scope
of the submission to arbitration: Provided that, if the decisions on matters submitted
 to arbitration can be separated from those not so submitted, that part of the award
which contains decisions on matters submitted to arbitration may be enforced; or

d. the composition of the arbitral authority or the arbitral procedure was not in
accordance with the agreement of the parties, or, failing such agreement, was not in
accordance with the law of the country where the arbitration took place; or
e. the award has not yet become binding on the parties, or has been set aside or
suspended by a competent authority of the country in which, or under the law of which,
that award was made
.
f. the subject-matter of the difference is not capable of settlement by arbitration under the
law of India; or
g. the enforcement of the award would be contrary to the public policy of India.

The Amendment Act has restricted the ambit of violation of public policy for
international commercial arbitration to only include those awards that are: (i) affected by
fraud or corruption, (ii) in contravention with the fundamental policy of Indian law, or
(iii) conflict with the notions of morality or justice.

It is further provided that if an application for the setting aside or suspension of the award
has been made to a competent authority, the Court may, if it considers it proper, adjourn
the decision on the enforcement of the award and may also, on the application of the
party claiming enforcement of the award, order the other party to give suitable security.

Section 49 provides that where the Court is satisfied that the foreign award is
enforceable under this Chapter, the award shall be deemed to be a decree of that Court.

CONCLUSION

The design of the new Act is based on the premise that it will provide an efficient and
swift method of dispute resolution for both the domestic as well as international
investors. It is apposite to quote Sir LJ Earl Warren, "It is the spirit and not the form of
law that keeps the justice alive." Although there have been judgements which have
disturbed the calm waters of the arbitration, the cumulative endeavour should be to
preserve the spirit underlying the Act which is precisely the objective of the new
amendment Act. With a surge in the business opportunities and entrepreneurship in India,
it is only proper to anticipate proper implementation of the Act in harmony with the
UNCITRAL Arbitration Rules which forms the foundation of the Act.