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CHANAKYA NATIONAL LAW UNIVERSITY

ADR PROJECT WORK ON TOPIC:


ENFORCEMENT OF NEW YORK CONVENTION AWARDS
PRESENTED BY: - SUDHAKAR MISHRA
B.A.LLB, 6th SEMESTER, 3nd YEAR
ROLL NO.:- 970
SUBMITTED TO: Date:-

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ACKNOWLEDGEMENT
Writing a project is one of the most significant academic challenges I have ever faced.
Though this project has been presented by me but there are many people who remained in
veil, who gave their support and helped me to complete this project.
First of all I am very grateful to my subject teacher, without the kind support of whom and
help the completion of the project was a Herculean task for me. She gave her valuable time
from her busy schedule to help me to complete this project and suggested me from where and
how to collect data.
I am very thankful to the librarian who provided me several books on the topic which proved
beneficial in completing this project.
I acknowledge my friends who gave their valuable and meticulous advice which proved to be
very useful and could not be ignored in writing this project. I want to convey a most sincere
thanks to my seniors for helping throughout the project.

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TABLE OF CONTENTS
1. Intoduction5-6
2. Summary of Provisions of New York Conventions...7-9
3. Law Governing Foreign Arbitration Award in India and Enforcement of New
York Convention...........10-13
4. Conclusion..14
References

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OBJECT OF THE STUDY

To analyze the importance of New York Convention on Law of Arbitration.


To understand the enforcement of Foreign Arbital award in India.

HYPOTHESIS
International arbitration has been the preferred dispute resolution procedure over litigation for
resolving disputes between commercial parties from different countries. One of the key
reasons is that under the New York Convention an award issued in one New York Convention
country can be enforced in any other New York Convention country.
RESEARCH METHODOLOGY
The researcher will be inclined to only doctrinal method of research in this research work
which includes referring to various text books, various online databases and various legal
dictionaries.

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1. INTRODUCTION
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known
as the New York Convention, was adopted by a United Nations diplomatic conference on 10
June 1958 and entered into force on 7 June 1959. The Convention requires courts of
contracting states to give effect to private agreements to arbitrate and to recognize and
enforce arbitration awards made in other contracting states. Widely considered the
foundational instrument for international arbitration, it applies to arbitrations which are not
considered as domestic awards in the state where recognition and enforcement is sought.
Though other international conventions apply to the cross-border enforcement of arbitration
awards, the New York Convention is by far the most important.1
International arbitration is an increasingly popular means of alternative dispute resolution for
cross-border commercial transactions. The primary advantage of international arbitration over
court litigation is enforceability: an international arbitration award is enforceable in most
countries in the world. Other advantages of international arbitration include the ability to
select a neutral forum to resolve disputes,that arbitration awards are final and not ordinarily
subject to appeal, the ability to choose flexible procedures for the arbitration, and
confidentiality.2
Recognizing the growing importance of international arbitration as a means of settling
international commercial disputes, the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (the Convention) seeks to provide common legislative standards for
the recognition of arbitration agreements and court recognition and enforcement of foreign
and non-domestic arbitral awards. The term "non-domestic" appears to embrace awards
which, although made in the state of enforcement, are treated as "foreign" under its law
because of some foreign element in the proceedings, e.g. another State's procedural laws are

1 Convention on the recognition and enforcement of foreign awards, available at


http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.html.
2 Albert Jan Van Den Berg, The New York Convention, 1958: An Overview,
available at http://www.arbitrationicca.org/media/0/12125884227980/new_york_convention_of_1958_overview.pdf.
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applied.3 The Convention's principal aim is that foreign and non-domestic arbitral awards will
not be discriminated against and it obliges Parties to ensure such awards are recognized and
generally capable of enforcement in their jurisdiction in the same way as domestic awards.
An ancillary aim of the Convention is to require courts of Parties to give full effect to
arbitration agreements by requiring courts to deny the parties access to court in contravention
of their agreement to refer the matter to an arbitral tribunal.
The Convention is open to accession by any Member State of the United Nations, any other
State which is a member of any specialized agency of the United Nations, or is a Party to the
Statute of the International Court of Justice (articles VIII and IX).

3 Supra note 1.
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2. Summary of Provisions of New York Convention


The following briefly describes the two basic actions contemplated by the New York
Convention:4
The first action is 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 limitatively listed in Article V(1). The court may on its own motion
refuse enforcement for reasons of public policy as provided in Article V(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 courts 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-favourableright provision of Article VII(1).
The second action contemplated by the New York Convention is the referral by a court to
arbitration. Article II(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. In both actions the arbitration agreement must
satisfy the requirements of Article II(1) and (2) which include in particular that the agreement
be in writing.
4

Albert Jan Van Den Berg, The New York Convention, 1958: An Overview, available at
http://www.arbitration-icca.org/media/0/12125884227980/new_york_convention_of_1958_overview.pdf.

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The 1958 New York Convention for the recognition and enforcement of arbitral awards is
frequently celebrated for what it has achieved in terms of facilitation of international trade
and harmonization of arbitration law and practice. It is somehow interesting that such a
successful international instrument contains no description about the subject matters the
recognition and circulation of which it is intended to facilitate. During the negotiation of the
Convention, several attempts were made with a view to providing some kind of definition.
However, fears of unnecessary qualification and the wish to secure the broadest possible
application resulted in any such attempts being eventually abandoned.
It must be underlined that the New York Convention is not the only major instrument dealing
with arbitration lacking any such definition. The UNCITRAL Model Law, for example,
refrains from describing what constitutes an arbitral award even though the adoption of a
definition was considered and discussed throughout its negotiation and drafting.
What are the decisions falling within the scope of the New York Convention? The analysis
that we are highlighting here is not connected to the issue of whether an award is a foreign
one or should be considered as such pursuant to Article I of the Convention. The issue here is
two-fold and is concerned with (a) the definition of what is arbitration (for the purpose of
identifying the means of dispute resolution that may produce a decision enforceable under the
Convention) and, having settled that, (b) the orders issued in an arbitration that can be validly
enforced under the Convention.
The alternativity test and the finality test
There seems to be general agreement that the Convention is only intended to cover dispute
resolution processes which can be regarded as a truly definitive alternative to the jurisdiction
of domestic courts and whose awards have the same legal force as a court judgment. This
apparently easy path of analysis may be quite complicated to follow in practice. Not least
because the terminology employed in practice can be confusing at times. However, it must be
remembered in this last respect that, as leading commentators and court decisions have
explained, the identification of the actual nature of a means of dispute resolution is not
affected by the name or title employed to describe it.
The identification of what is arbitration for the purpose of applying the Convention is only
the first part of the two-fold analysis. Indeed, not all orders rendered in arbitration are
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covered by the Convention. As is well known, arbitral tribunals employ a great variety of
orders to direct the development of the arbitral process. It is clear that directions issued by a
tribunal to allocate tasks and deadlines in the proceedings are unlikely to qualify as awards
covered by the Convention. However, in some cases, tribunals orders can give rise to a
considerable amount of uncertainty as to their actual nature and therefore as to their
enforceability under the Convention. It is advocated that only orders which finally settle one
or more of the issues which have validly come within the jurisdiction of the arbitral tribunal
should qualify for recognition and enforcement under the Convention. Such awards are not
necessarily those that exhaust the tribunals mandate. The awards that should qualify for
recognition and enforcement under the Convention are all the awards which finally adjudicate
one or more of the several differences which have been submitted to the jurisdiction of an
arbitral tribunal. The word final implies that once the issue has been adjudicated it would be
no longer possible, not even if the tribunal wished, to reopen the issue.

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3. Law governing the Foreign Arbitration Awards in India and the effect of the
New York convention
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The New York Convention on the Enforcement of Foreign Arbitral Awards became effective
in India on 13 July 1961. This means that, in theory, Indian courts may only refuse to enforce
a foreign award in the limited circumstances set out in Article V of the New York
Convention.
However, unlike most other Convention states, India has not officially recognised all the
signatories to the New York Convention. Indian courts will therefore only enforce foreign
awards under the New York Convention if they have been issued in a state that has been
notified in the Official Gazette of India as a country to which the New York Convention
applies.
Prior to the enactment of the Arbitration and Conciliation Act, 1996 (Act) the law
annulment of domestic and enforcement of foreign awards were governed by the Indian
Arbitration Act, 1940 (1940 Act), the Arbitration (Protocol and Convention) Act, 1937 and
the Foreign Awards (Recognition and Enforcement) Act, 1961 (1961 Act). The 1961 Act
was enacted by the Indian Legislature to implement the New York Convention. The 1996 Act
was enacted pursuant to the commitment of the Government of India to make an appropriate
legislation amending and consolidating the law in terms of UNCITRAL Model Law and
Rules.5
Part II of the Act relates to enforcement of certain foreign awards. Chapter 1 of this Part
deals with New York Convention awards. Section 46 of the Act speaks as to when a foreign
award is binding. Section 47 states as to what evidence the party applying for the
enforcement of a foreign award should produce before the court. Section 48 states as to the
conditions for enforcement of foreign awards. As per section 49, if the court is satisfied that a
foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of
that court and the court has to proceed further to execute the foreign award. Section 48 of the
Act provides that enforcement of a foreign award may be refused, at the request of the party
against whom it is invoked, only if that party furnishes to the court proof about the existence
of any one or more grounds mentioned in clauses (a) to (e) of sub-section (1) of Section 48 of
the Act. It can also be refused if the court finds any of the grounds mentioned in clauses (a)
and (b) of sub-section (2) of section 48 of the Act.6
5 Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd., (2006) 11 SCC
245 (269).
6 Ginny Jetley Rautray, Enforcement of Foreign Arbitral Award in India, available
at http://www.rautray.com/article4.pdf.
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Section 47 of the Act, which is in Part II, whilst dealing with enforcement of certain foreign
awards has defined the term court as a court having jurisdiction over the subject-matter of
the award. This has a clear reference to a court within whose jurisdiction the asset/person is
located, against which/whom the enforcement of the international arbitral award is sought. 7
Where the subject matter of the award is money, the enforcement application can be filed in
the court within whose jurisdiction the bank account of the respondent is located. Therefore, a
party seeking to enforce a foreign award can file the application in any court in India as long
as the money asset is located within the jurisdiction of the court in which he intends to file the
application. If the applicant does not find money in the account maintained by the
Respondent within the courts jurisdiction, he may file another application for enforcement of
the award in the court within whose jurisdiction respondents assets are located. 8 The
expression subject matter of the award to the explanation under section 47 is different from
the expression subject matter of the arbitration under section 2(e) of Part I of the Act. 9 If the
subject matter of the award is not money then the party seeking to enforce is seeking to
ensure that the award is implemented by the respondent and enforcing partys rights and
interest are given effect to. Therefore, a successful party in order to enforce and execute an
award has to initiate legal proceeding as envisaged under section 47 of the Act.
Are foreign arbitral awards enforced in India in practice? 10
Even where international arbitration awards have been made in a notified country,
enforcement in India to date has been difficult.
There are a number of factors that have contributed to this:

The interventionist approach of the Indian judiciary: the courts have traditionally
shown a willingness to intervene in all aspects of international arbitration when petitioned by
a party. Not only have interim orders been made, stopping arbitrations in their tracks, but the
7 Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC
552 (606).
8 Wireless Developers Inc v. India Games Ltd., 2012 (2) ARBLR 397 (Bom).
9 Tata International v. Trisuns Chemical, 2002 (2) Bom CR 88.
10 Richard Gubbins, Legal View: Enforcement of foreign arbitral awards in India,
available at http://indiaincorporated.com/item/3504-enforcement-of-foreign-arbitral-awards-in-india.html.
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courts have generally shown little restraint in setting aside awards or refusing enforcement.
This trend appears to be on the decline, however.

Refusal of enforcement on the grounds of "public policy": enforcement of an award


can be refused under the New York Convention if it is in breach of "public policy". Since the
term "public policy" is not defined in the New York Convention, the courts in India have
interpreted this term liberally, to the detriment of enforcing parties. In Saw Pipes, the Indian
Supreme Court ruled that an award would not be enforced where it was against the public
policy of India or the interests of India, including where a tribunal has made an error in
applying Indian law. This effectively meant that parties could appeal arbitration awards to
the Indian courts where the governing law of the contract was Indian law. In
Phulchand, the Supreme Court also applied this to the enforcement of foreign awards in
India.

However, in the recent case of Lal Mahal, the Supreme Court revised this approach,
and ruled that this broad interpretation of "public policy" does not apply to foreign awards.
Instead, enforcement of foreign awards will apply the narrower test of patent illegality or
immorality. This new test has yet to be applied in the lower courts in India, however.

The legacy of Bhatia International: Bhatia International and subsequent cases were
the high watermark of Indian judicial interventionism. In these cases, it was held that the
Indian courts had the same powers in respect of a foreign arbitration as they did in respect of
a domestic arbitration. This meant that as well as being able to refuse enforcement of a
foreign award, the Indian courts could also order interim measures in foreign arbitration
proceedings, and set aside foreign arbitral awards on the petition of the losing party. In other
words foreign arbitrations that were already regulated by the courts of the seat of arbitration
were also exposed to intervention by the Indian courts.

This was particularly troublesome in the enforcement context. It meant that losing
parties could undermine awards on several fronts. First, they could resist the winning partys
petition to enforce the award under Part II of the Arbitration and Conciliation Act 1996 (the
Act) (relating to foreign arbitrations). In parallel, they could lodge a petition under Part I of
the Act (relating to domestic arbitrations), to set aside the award; and possibly also apply
to the courts at the seat of the arbitration. This meant that the award could not be enforced
until all the actions had been heard.

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Turning of the tide11


Fortunately, however, it seems that a new approach is being adopted in India. Following the
recent decisions of the Supreme Court in Lal Mahal and BALCO, it would be fair to say that
the Indian law on arbitration is being aligned with the true intent of the New
York Convention.
The BALCO case in particular is likely to have a significant impact on how Indian courts will
deal with foreign arbitrations in the future. BALCO has overturned the reasoning in Bhatia
International and the cases that immediately followed. Under this new regime, the powers
that Indian courts can exercise in relation to domestic arbitrations (under Part I of the Act)
cannot be exercised in relation to a foreign seated arbitrations. The powers that the Indian
courts can exercise in relation to a foreign arbitrations have been limited to those set out in
Part II of the Act, namely: to give effect in India to an agreement referring disputes to
arbitration in another country, and to enforce foreign arbitration awards in India.
However, despite the encouraging signs in BALCO, there still remains some uncertainty
regarding the enforcement of foreign arbitral awards in India. Since the Supreme Court
restricted the application of BALCO to disputes arising from agreements executed after
the date of the judgment (6 September 2012), the Indian courts may still apply the
interventionist reasoning of Bhatia International to any arbitration agreement executed
on or before then. In Union of India v Reliance Industries Ltd, the Delhi High Court followed
this carveout in BALCO, and upheld its jurisdiction under Part I of the Act to set aside an
award from an arbitration that was seated in London. This decision was on the basis that the
arbitration agreement was executed before BALCO and there was no express or implied
exclusion of Indian law. To avoid this result in future, parties should consider amending preBALCO arbitration agreements to exclude the application of Part I of the Act, or to
restate them as after the date of BALCO.

11 Richard Gubbins, Legal View: Enforcement of foreign arbitral awards in India,


available at http://indiaincorporated.com/item/3504-enforcement-of-foreign-arbitral-awards-in-india.html.
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4. CONCLUSION
To conclude it can be said that before the Supreme Courts judgment in Balcos case, law
governing the enforcement of foreign Arbitral Award in India was full of confusion, but this
confusion has been settled now to much extent.
The decision of the Supreme Court in the Bharat Aluminium Co. v. Kaiser Aluminium
Technical Services Inc. has rightly overruled the principle from Bhatia International v.
Bulk Trading S.A. The Bhatia Judgment allowed for applicability of Part I of the Indian
Arbitration and Conciliation Act, 1996 (1996 Act) to arbitrations having their seat outside
of India, when parties have not expressly or impliedly agreed to exclude its applicability. The
criticism of the Bhatia Judgment was obvious, especially when the Section 2(2) of the 1996
Act makes the Part I applicable to the arbitration only where its place is in India. Section
2(2), which is present in the Part I of the Arbitration Act, states that:This Part shall apply
where the place of arbitration is in India. The BALCO Judgment clarifies that the omission
of the word only in Section 2(2) of the 1996 Act does not mean that the parliament intended
to make Part I applicable to foreign-seated arbitrations. The BALCO Judgment clarifies that
the omission of the word only in Section 2(2) of the 1996 Act does not mean that the
parliament intended to make Part I applicable to foreign-seated arbitrations. The reason for
the omission is that Article 1(2) of The UNCITRAL Model Law has the words except
Articles 8, 9, 35 and 36 and, therefore, had to use the word only to clarify that these
provisions would apply also to domestic arbitrations. Since the 1996 Act stipulates no such
exceptions, the retention of the word only in Section 2(2) of the 1996 Act would prove
redundant. Such a departure from using only did not in any way indicate a departure from
the fundamental principles of territoriality.
However the court has made it clear that the judgment given in Balco case will have
prospective effects only. Choosing to make the BALCO Judgment retrospective would have
forced the Courts to apply the BALCO Judgment, thereby causing for a large number of cases
to be reopened (appeals) thereby adding to the already existent long list of pending cases.

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References:

www.uncitral.org.
indiaincorporated.com.
www.rautray.com.
www.arbitration-icca.org.
http://www.legallyindia.com.

Books:

Dr.N.V.Pranjape, Arbitration and Conciliation Act, 2nd ed., 2002.


O.P.Malhotra, The law and Practice of Arbitration and Conciliation, Lexis Nexis,
2nd ed., 2006.

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