The Supreme Court put the controversial issue of foreign arbitration to rest last month in a landmark ruling that aligns India with international best practices and paves the way for Indian parties to opt for foreign arbitration.
The decision in the PASL Wind Solutions Private Limited v GE Power Conversion Private Limited case is of significant importance for parties in cross-border trading and for those with an overseas presence who wish to streamline disputes by opting for a unified overseas seat .
“Nothing stands in the way of party autonomy in determining an arbitration tribunal outside India, even if both parties are Indian nationals,” noted the three-member bank, headed by Justice Rohinton Fali Nariman.
Nicholas Peacock, partner and head of Bird & Bird’s London Arbitration Panel, told the India Business Law Journal that one of the companies that is 99% owned by a foreign group “may find it more convenient or convenient to arbitrate overseas to hold “. .
Peacock adds that much also depends on commercial factors and bargaining power, not to mention the convenience of international corporations using local subsidiaries to settle their disputes on land.
In the 106-page ruling, the court determined how parties that agree to a neutral forum outside India can claim “two bites of the cherry”. That is, the losing party can contest the award in the courts of the foreign arbitration tribunal and then oppose the enforcement of the foreign award in India.
The ruling confirms the Indian parties’ choice of a foreign arbitration venue in their contracts under Indian law, says Kshama Loya, director of investor-state arbitration at Nishith Desai Associates in Mumbai.
The parties are likely to change their arbitration agreements and choose a foreign seat that could open the floodgates. Loya does not rule out the possibility that Indian parties involved in an India-based arbitration could elect to move from an Indian seat to a foreign seat. It could be difficult, but not impossible, she says.
If the Supreme Court had decided not to allow arbitration based abroad, it could have had an impact on ongoing arbitrations, says Ajay Thomas, independent arbitrator and member of the Arbitration and Alternative Dispute Settlement Commission of the International Chamber of Commerce (ICC) in New Delhi . It would have given the losing parties additional reasons to contest arbitration awards domiciled abroad.
But a coin always has two sides. The ruling could potentially open the floodgates for Indian companies to conduct arbitration overseas.
Given its proximity to India, the Singapore International Arbitration Center should benefit most from this. India’s aspirations to become an international arbitration center could be compromised, says Thomas.
Peacock feels different. “The supportive approach to international arbitration re-adopted by the Supreme Court in this ruling underscores its growing status as the seat of international arbitration,” he said.
The country’s drive to become a leading international arbitration center needs to get the framework and support for international arbitration right. “It can only be done through attraction, not force,” says Peacock. The decision allows the parties a free choice and full support for the arbitration and ultimately makes it more attractive to remain within the jurisdiction of the Indian courts, he added.
India-based parties and contracting parties that are to be fully exported in India might prefer India as the seat of arbitration, Loya says. This would save the cost of conducting arbitration at the overseas headquarters, allowing evidence to be taken in India, and saving the potential cost of initiating additional proceedings to contest the award at the overseas headquarters before enforcing the same in India, which could include additional procedures, when resisted, she explains.
The main problem would be ensuring that the award given at the overseas headquarters needs to be demarcated from opposition to enforcement in India, Loya says. If the overseas award addresses a matter that is non-arbitral in India or is contrary to Indian public order, enforcement of the award could be resisted.
India remains the challenge of attracting arbitration proceedings where one party is a foreign party.
India has made significant changes to the legal framework and judicial policy to support arbitration proceedings where one side involves a foreign party, Loya says.
Thomas believes the government will step in to change the arbitration law if the Supreme Court ruling curbs efforts and arbitration is seen to drain.
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