IDENTIFYING THE THIN LINE OF DIFFERENCE BETWEEN SEAT AND PLACE OF ARBITRATION

AUTHORS:

Jahnvi Gupta, DNLU Jabalpur

Vartika, Army Law College, Pune

Gunjan Hariramani, MNLU

EDITOR: Akansha Singh, RMLNLU Lucknow



INTRODUCTION

“AN OUNCE OF MEDIATION IS WORTH A POUND OF ARBITRATION AND A TON OF LITIGATION[1]

- JOSEPH GRYNBAUM

When did Arbitration come? If you think Arbitration came in 19th or 20th century, then you are mistaken. It was there in the roots since 300 BC, philosophers and archaeologists have uncovered evidence of the use of arbitration in the primitive civilizations of Egypt, Assyria and Mesopotamia. Arbitration was extensively used by the ancient Greeks and Romans and once Aristotle wrote in his time, “For an arbitrator goes by the equity of a case, a judge by the law, and arbitration was invented with the express purpose of securing full power for equity.” So this implies that Arbitration was an important part and is still an important part because it is substantially similar to that used today in seeking justice. Arbitration is a legal procedure which encourages settlement of disputes between two or more parties mutually by the appointment of a third party who is also called the arbitrator and whose decision is binding on the parties referring the said dispute.[2] Arbitration means a resolution of disputes through an arbitrator, in other words, a third party who is disinterested in either of the parties. It is a course of Alternate Dispute Resolution (ADR) system which advances the parties who do not want to go through court proceedings.[3]


SIGNIFICANCE OF ARBITRATION

Around 46 lac cases are pending in all 25 high courts of India and the post of judges to govern all these cases in total is 1079, on the other side, in Supreme Court, approximately 59,670 cases are pending as on 1st Feb. 2020 against 33 judges in the Supreme Court. [4]

Arbitration is growing significantly in the coming times as a medium of Dispute Settlement. It’s a need in the following ways -

● Expansion and popularization of commercial Relations, especially international relations.[5]

● A time-saving procedure as compared to the court trial procedure, which consumes a lot of time and money.[6]

● Speedy disposal of cases. [7]

● It also maintains confidentiality between the parties.[8]

● The limited intervention of the judiciary. [9]

There are three types of Arbitration procedures considered in India, which are as follows[10]

  1. Ad- Hoc Arbitration

  2. Institutional Arbitration

A soon as the arbitration proceeding is complete then an award has to be issued and finally then is the end of the matter. Section 34 of the the Arbitration and Conciliation act, 1996 Act talks about “Recourse against arbitral award”[11] .

SEAT, PLACE, AND VENUE

The venue is the physical/geographic region where the arbitration meeting is conducted. The seat of arbitration, however, refers not to the area where the arbitration takes place but the governing laws and the framework under which the proceedings take place. The seat hence forms the jurisdiction. The Supreme Court in Union of India v Hardy Exploration and Production (India)[12] held that “seat” and “place” can be used interchangeably. Furthermore, the apex court held that the 'venue' of arbitration was not the same as 'place' or 'seat' of arbitration. In the case of Enercon India vs. Enercon GmBh [13], the Supreme Court held that it was the seat that would be considered while resolving disputes related to arbitration proceedings and not the venue. The apex court opined that the UK court could not be approached for giving interim orders solely because the proceedings were being held in London. The seat will have jurisdiction over the proceeding unless there is no mention of the seat in the agreement.

CONCEPT OF SEAT OF ARBITRATION AND ITS IMPORTANCE

● The Seat of Arbitration determines the applicable law governing the Arbitration including the procedural aspects. When the parties state the law which is applicable for the Arbitration Agreement, that law governs the Arbitration agreement including the procedural aspects of Arbitration. However, if the parties haven't specifically chosen the law governing the conduct and procedure of Arbitration, expressly, or by necessary implication, the conduct of the Arbitration is going to be determined by the law of the place of the Seat of Arbitration. The regulation of the conduct of arbitration and challenge to an award would have to be done by the courts of the country in which the Seat of Arbitration is located intrinsically Court would be the supervisory court possessed with the facility to annul the award.

● The Supreme Court in its decision given within the case of Bharat Aluminium Company Ltd v. Kaiser Aluminium Technical Service Inc ("Balco")[14] held that the selection of another country is because of the fact that the Seat of Arbitration inevitably indicate acceptance and so the law of that country will apply to the proceedings.

● If the Arbitration Agreement is found or held to supply for a Seat/place of Arbitration outside India, then albeit the contract specifies that the Indian Arbitration Act shall govern the arbitration proceedings, Indian courts cannot exercise supervisory jurisdiction over the Arbitration or the award.

● However, in the new proposed amendments to the Arbitration and Conciliation Act, 1996 ("Act"), the Law Commission Report ("Report")[15] has recommended that Part I of the Act, such as Section 9 (interim relief), Section 27 (court assistance for evidence), Section 37(1)(a) (appealable orders), will remain available to parties in a foreign Seated Arbitration which now has been accepted by the Union Cabinet. Further, in one of the opposite amendments suggested within the Report, the definition of Seat would be inserted to mean the juridical Seat of the Arbitration.[16]

DIFFERENCE BETWEEN SEAT AND VENUE OF ARBITRATION

● The Seat of Arbitration can be independent of the place or the venue where the hearings or other parts of the arbitral process occur or happen. The Seat of Arbitration it's of important importance, for it is the courts of the Seat that have the supervisory jurisdiction over the arbitral process. Identification of the Seat of Arbitration post-Balco has become one of the foremost important features of an article. the choice of the Seat determines the law governing the Arbitration procedure and sometimes, more importantly, the method and rights concerning the enforcement of the arbitration award.

● It is not necessary for the Seat of Arbitration and therefore the venue of the Arbitration to be an equivalent. Location and even when hearings happen during the course of the Arbitration in several different countries, the chosen Seat of Arbitration will remain unaffected independent of the geographical place where the hearings happen.

● In the case of Enercon (India) Ltd and Ors v Enercon Gmbh [17] before the Hon’ble Supreme Court of India, a dispute arose for non-delivery of supplies under a property License Agreement (“IPLA”) containing an article. The relevant aspects of the article at issue were as under:

● The governing law of the IPLA was Indian law; the venue of the arbitration was London; and therefore the provisions of the Indian Arbitration and Conciliation Act, 1996 were to be used.

● There was a sequence of proceedings initiated both in India and in England seeking declarations on the validity of the article and posing for anti-suit injunctions. When the matter was before the court it had concluded that though London wasn't the Seat of Arbitration, English Courts would have concurrent jurisdiction since the venue of arbitration was London. The matter then went before the Hon’ble Supreme Court where the important issue was that assuming that the Seat of Arbitration was India, whether English Courts would have concurrent jurisdiction because the venue of arbitration is in London?

● The Supreme Court of India held that "the express mention within the article that London was the venue of the arbitration couldn't cause the inference that London was to be the Seat because, the law governing the substantive contract, the law governing the arbitration agreement and the law governing the conduct of the arbitration were chosen to be Indian law and therefore the closest and most real connection was with India. Once the Seat was in India, Indian Courts would have exclusive supervisory jurisdiction and English Courts cannot have concurrent jurisdiction".[18]

CAN TWO INDIAN PARTIES CHOOSE A FOREIGN SEATED ARBITRATION

● The Bombay High Court in the recent case of M/s Addhar Mercantile Private Limited vs Shree Jagdamba Agrico Exports Pvt Ltd[19] in a section 11 Application under the Act had considered the important issue on whether two Indian parties can choose an overseas Seat of Arbitration? Two Indian parties can choose an overseas Seated Arbitration?

● The Hon'ble Bombay High Court relying upon the judgment passed by Hon'ble Supreme Court in the case of TDM Infrastructure Private Limited v UE Development India Private Limited[20] has held that the intention of the legislature would be clear that Indian parties and corporations incorporated in India shouldn't be permitted to derogate from an Indian law which is a part of the public policy of the country and hence cannot choose a foreign seat of Arbitration and thus relying upon an equivalent went ahead to appoint an Arbitrator within the aforesaid case. However, there is also a judgment of Reliance Industries Limited & Anr v Union of India[21] which talks about two Indian parties having a foreign Seated Arbitration. However, the said judgment finally does not address the said issue. There seems to be some uncertainty with reference to the aforesaid issue as on date. A conclusive finding on the same from the Hon'ble Supreme Court of India would be welcome.[22]

CONCLUSION

If we notice the current scenario, there has been a sudden and fast growth in international dealings and contracts and as a result of it, there is an increase in disputes in regard to international arbitration. In today’s modern and practical world, performing the work of arbitration amounts to making a contribution to the articulation of a "new civil procedure". The volume and uniformity of the judicial decisions on arbitration leave little doubt that something new is afoot that has profound implications for the practice and the traditional character of law. The march of arbitration goes along an ever more marked path.

[1] Dispute resolution quotes, Adrtoolbox, (July 6, 2020, 11.20 P.M.) http://www.adrtoolbox.com/library/adr-quotes/ [2] Jagdeep Singh Bakshi, Arbitration law in India: Everything you want to know,THE STATESMAN (May 21, 2019, 8:04 P.M.), https://www.thestatesman.com/india/arbitration-law-in-india-everything-you-want-to-know-1502757528.html/. [3] Jagdeep Singh Bakshi, Arbitration law in India: Everything you want to know, THE STATESMAN, (July 7, 2020, 12.15 A.M.) https://www.thestatesman.com/india/arbitration-law-in-india-everything-you-want-to-know-1502757528.html. [4] Sagar Kulkarni, Nearly 46 lakh cases pending in High Courts; 3.19 crore in lower courts, Deccan Herald, (July 7, 2020, 1:01 A.M.), https://www.deccanherald.com/national/nearly-46-lakh-cases-pending-in-high-courts-319-crore-in-lower-courts-805320.html [5] Jagdeep Singh Bakshi, Arbitration law in India: Everything you want to know, The Statesman, (July 7, 2020, 12.15 A.M.) https://www.thestatesman.com/india/arbitration-law-in-india-everything-you-want-to-know-1502757528.html [6] Global India, White & Case LLP, Arbitration in India, (July 7, 2020, 1:57 A.M.) https://www.lexology.com/library/detail.aspx?g=72bcbbe3-c139-46f2-b9ce-086394161f41 [7] Ibid. [8] Thomas Halket, 10 Important Elements of Arbitration Agreements, Priori, (July 7, 2020, 1:30 A.M.) https://www.priorilegal.com/blog/10-important-elements-of-arbitration-agreements [9] Law of Arbitration in India- In a Nutshell, (July 7, 2020, 2:19 A.M.) https://www.vakilno1.com/legal-news/law-of-arbitration-in-india-in-a-nutshell.html [10] Supra Note 17. [11] Supra Note 6. [12] Union of India v Hardy Exploration and Production, (2018) S.C.C (India). [13] Enercon India vs Enercon GmBh, (2014) S.C.C (India). [14] (2012) 9 S.C.C 552 (India). [15] 246 Law Commission Report. [16] Devesh Juvekar and Dikshat Mehra, SEAT OF ARBITRATION, LEGAL SUITE, September 2015,at 2 https://www.manupatrafast.in/NewsletterArchives/listing/ILU%20RSP/2015/Sep/SEAT-OF-ARBITRATION.pdf. [17] 3 SLP (C) No. 10924 of 2013. [18] Devesh Juvekar and Dikshat Mehra, SEAT OF ARBITRATION, LEGAL SUITE, September 2015, at 2. https://www.manupatrafast.in/NewsletterArchives/listing/ILU%20RSP/2015/Sep/SEAT-OF-ARBITRATION.pdf. [19] Arbitration Application No. 197/2014 along with Arbitration Petition No. 910/2013. [20] 2008 (14) S.C.C 271 (India). [21] (2014) 7 S.C.C 603 (India). [22] Devesh Juvekar and Dikshat Mehra, SEAT OF ARBITRATION, LEGAL SUITE, September 2015,at 3. https://www.manupatrafast.in/NewsletterArchives/listing/ILU%20RSP/2015/Sep/SEAT-OF-ARBITRATION.pdf

130 views0 comments