“AUTONOMY OF TWO INDIAN PARTIES IN CHOOSING FOREIGN SEAT OF

ARBITRATION AND ITS RAMIFICATION”

One of the controversial questions in Indian arbitration law had been whether two Indian
parties can choose to have a seat of arbitration outside India?

Recently, the Supreme Court in PASL Wind Solutions Private Ltd. v. GE Power Conversion
India Pvt. Ltd. (Civil Appeal No. 1647 of 2021) set this controversy to rest and held that two
Indian parties can choose a foreign seat of arbitration. Consequently, it held that, such an
arbitration proceeding would culminate in a ‘foreign award’ under Part II of the Arbitration &
Conciliation Act, 1996 (“the Act”), and would be enforceable as such.

The Court upheld the observations of the Supreme Court in Atlas Exports and confirmed that
there is no prohibition against two Indian parties choosing a foreign seat for arbitration. And held
that the findings of the Supreme Court in TDM Infrastructure stating that the principles laid in
the said matter was specific to Section 11 (Appointment of arbitrators) could not be imported
into other matter .The Court also overruled a Bombay High Court decision In re, Seven Islands
Shipping Ltd. v. Sah Petroleums Ltd in which it was held that since the parties to the arbitration
were Indians, the arbitration was not an international commercial arbitration therefore the parties
cannot choose a foreign seat for their arbitration .
(“Sasan Power case”)of 2016 had also fortified that two Indian parties can have foreign seat for
their arbitration.
 on issue of ENFORCEABILITY AWARD IN CIRCUMSTANCES WHERE INDIAN PARTIES HAVE

CHOSEN FOREIGN SEAT OF ARBITRATION

Court held similar decicion as The Supreme Court in Bharat Aluminium Co. v. Kaiser
Aluminium Technical Services Inc.,1 that Part I and Part II of the 1996 Arbitration Act are
mutually exclusive with no overlapping, and rightfully held that “International commercial
arbitration” defined in Section 2(1)(f) of Part I does not relate to the words “foreign award”
in Section 44 under Part II and a foreign award under Part II is not party-nationality centric,
but seat-centric. And therefore such award in foreign seated arbitration WILL BE

ENFORCEABLE under Part II of the Arbitration & Conciliation Act, 1996 (“the Act”),
 FURTHER “FOREIGN AWARD” UNDER SECTION 44 IS NOT VIOLATIVE OF THE PUBLIC POLICY
U/S SECTION 28(1)(A) OF THE ARBITRATION ACT
Section 28(1)(a) pertains only to India seated domestic arbitration 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.

 Also the AWARD IN FOREIGN SEATED ARBITRATION IS NOT AGAINST PUBLIC POLICY UNDER

INDIAN CONTRACT ACT.As arbitration falls within the 1st exception provided under Section
28 of the Contract Act.
Indian statutes do not restrict Indian parties from having their seat of arbitration at a foreign country.

Supreme Court further held that Section 9 of the Arbitration Act under which any party to an
arbitration agreement can seek relief by way of an interim application from the court 3  remains
available where two Indian parties adopt a foreign seat. Two Indian parties are likely to have
assets in India, and Indian courts are permitted to protect those assets pending arbitration.

This judgment has affirmed the ruling of Bharat Aluminium Co. Vs. Kaiser Aluminium Technical
Services Inc.4 wherein the Supreme Court held that party autonomy is the brooding and guiding
spirit of the arbitration It addresses a big concern that almost all foreign entities with Indian
subsidiaries face i.e.to have the ability to resolve domestic disputes with other Indian parties in a
neutral/foreign jurisdiction with the ability to approach Indian courts for interim reliefs under
Section 9 of the Arbitration Act.

1
Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552.