INTRODUCTION

In today’s world of shrinking boundaries free trade and international commerce have become
global necessities. Increasing competitiveness often leads to conflicts between entrepreneurs,
resulting in commercial disputes.

In the sphere of international business contracts, the most notable feature of this phenomenon is
the very rapid evolution of legal rules, practices and institutional arrangements for resolution of
international business disputes by arbitration. This obviously is compelled by the need for a
faster and more efficient process of resolving international commercial conflicts in consonance
with the new and changing socio-economic dynamics in international trading relationships. As
the number and volume of trade have undergone a manifold increase, so have the character, form
and structure of such trade, which today defy all previous notions.

With the expansion of international trade in recent years, the business world has been
increasingly reluctant to litigate in courts of law, the differences arising from international
commercial transactions. Ability to communicate and commute with distant places with the
utmost speed enables a merchant today, in a few minutes or hours, to conclude a contract abroad
which a generation ago would have taken weeks or months. To obtain and enforce a judgment in
another country is still a complicated, time-consuming, and expensive operation. It is not
surprising, therefore, that businessmen have been turning with increasing frequency to arbitration
as a quicker and simpler means of settling international commercial disputes.

Since the Second World War, many nations large and small have striven to maximize growth,
productivity and beneficial exchange for their people. World markets have become considerably
more open and trade and investment opportunities have broadened substantially. In this
environment, it is apparent that the trade and investment transactions of today frequently
transcend national boundaries and class lines. Many more international alliances, connections
and relationships, which were unimaginable before, are now being structured with greater ease.
Participants in international trade and business transactions are stressing the virtues of optimal
specialization, extensive trade and factor mobility which in turn demand increased contract
liberalization, investment openness and a greater willingness to submit to international
arbitration. In Western developed countries the flurry of activity in this division, in so far as
international arbitration is concerned, has been expressed by amendments to existing laws to
bring them in line with the growing body of generally accepted provisions on arbitration coupled
with liberal practices and modification of rules for the enforceability of agreements to arbitrate.

The more the opportunities for business, the more contracts, the more alleged breaches of
contract and disputes, the more claims and calls for litigation or arbitration.

Arbitration, a form of alternative dispute resolution (ADR) is a legal technique for the resolution
of disputes outside the courts, wherein the parties to a dispute refer it to one or more persons (the
"arbitrators" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound.
Arbitration is most commonly used for the resolution of commercial disputes, particularly in the
context of international commercial transactions.

International Arbitration has become the established method of determining international

commercial disputes. International Arbitration is a system of dispute resolution selected by many
of the world's leading international companies. By inserting an arbitration clause into their
agreements with trading partners, they opt to have disputes arising out of or in connection with
the contract decided by private tribunals ('arbitral tribunals') rather than litigating them in
national courts. Arbitration is particularly common in the insurance, construction and
engineering, oil, gas and shipping industries and increasingly so, in banking and financial
services.

For international commercial transactions, parties may face many different choices when it
comes to including a mechanism for resolving disputes arising under their contract. If they are
silent, they will be subject to the courts of wherever a disaffected party decides to initiate legal
proceedings and believes it can obtain jurisdiction over the other party. This may not sit well
with parties that need to know at the time of entering into their contract that their contractual
rights will be enforced. The alternative to silence is to specify a method of binding dispute
resolution, which can be either litigation before the domestic tribunal of one of the parties or
arbitration. If the parties choose to resolve their disputes in the courts, they may encounter
difficulties. The first is that they may be confined to choosing one or the others' courts, as the
courts of a third country may decline the invitation to devote their resources to deciding a dispute
that does not involve any of that country's national interests. The second, and perhaps more
significant difficulty, is that judicial decisions are not very "portable", in the sense it is difficult
and sometimes impossible to enforce a court decision in a country other than the one in which it
was rendered.

The non-judicial nature of arbitration makes it both attractive and effective for several reasons.
The most common reason for opting for arbitration is that arbitration awards (broadly equivalent
to a court judgment) are easier to enforce internationally and cannot so easily be dragged through
appeal courts for years. International arbitration enables them to have their disputes decided by a
neutral tribunal, which can be made up of legal and/or industry experts of the parties' own
choosing, using procedures which they can influence.

The Arbitration process is administered by a panel of arbitrators who are agreed upon by both
parties, these arbitrators may have specialized competence in the relevant field, the
confidentiality of the arbitration process may appeal to those who do not wish the terms of a
settlement to be known. The arbitral awards have a great degree of international recognition. For
example, more than 140 countries have agreed to abide by the terms of the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards of 1958.

The ability to resolve disputes in a neutral forum and the enforceability of binding decisions are
often cited as the main advantages of international arbitration over the resolution of disputes in
domestic courts. And there is solid legal support for this view. An international award originating
in a country that is a party to the New York Convention of 1958 may be enforced in any other
country that is also a signatory, as if they were rendered by domestic courts.

Thus, parties to international contracts can decide to site their disputes in a third, neutral country,
knowing that the eventual award can be easily enforced in any country that is a signatory to the
New York Convention, which has been ratified by a significant majority of commercial nations,
with notable exceptions like Qatar, which not having ratified the New York Convention cannot
be assumed to give effect to arbitration decisions rendered in other countries. An international
award therefore has substantially greater executory (legal) force than a domestic court decision.
Enforcement of foreign arbitral award is the subject-matter of study for this paper. The author
has tried to look at the various aspects of Enforcement of Foreign Arbitral Award.

The paper begins by trying to understand the meaning of the terms arbitration, international
commercial arbitration and meaning of arbitral award and foreign arbitral award. It then deals
with the arbitration clauses in contracts between parties and submission agreement and also the
autonomy of the Arbitral Agreement. Next, it moves on to the Conventions i.e. Geneva
Convention and New York Convention which provide for the enforcement of foreign arbitral
award and comparison between the two conventions. Then the paper analyzes Enforcement of
foreign award in India wherein the researcher tries to examine the evolution of law of Arbitration
in India and the concept of Public Policy as a new ground for challenge to enforcement of
foreign award. Researcher further in the project paper critically analyzes the latest Supreme
Court decision on setting aside Foreign Arbitral Awards. Lastly, the researcher explains how the
leading arbitration jurisdictions tend to limit judicial review of Arbitral Awards and concludes
the paper with some suggestions.
 RESEARCH METHODOLOGY

Aims and Objectives

The project aims at studying the various aspects related to enforcement of foreign arbitral award
in India. It begins by defining the concept of Arbitration and International Commercial
Arbitration and then proceeds to the necessity of an Arbitration Clause in a contract. The
ultimate objective is to understand the difficulties faced in the enforcement of a foreign arbitral
award in a country and ways to mitigate those difficulties thereby providing an effective
mechanism for the enforcement of foreign award in a country.

Scope and Limitations

The scope of the project has been restricted to the broad topics within Enforcement of Foreign
Arbitration Award in India and the related issues. Nevertheless, the Researcher has endeavored
to cover basic relevant topics related to the Project topic i.e. concepts such as Arbitration and
International Commercial Arbitration and the Arbitral Award, the origin of arbitration i.e.
Arbitration clause in a contract and certain International Conventions related to the Enforcement
of Foreign Arbitration Award, which form the basis of enforcement of foreign arbitral award.

Method of Writing

The researcher has endeavored to use a combination of descriptive as well as critical styles of
writing throughout this project. More emphasis has been placed on the critical style of writing.

Sources of Date

The main sources have been books, and articles written by reputed jurists on the subject. The
Researcher has also done extensive web-research and referred to various web-sites.

Research Questions

The questions which the researcher has sought to answer in this project are as follows:

1. What is Arbitration, International Commercial Arbitration and Foreign Arbitral Award?

2. What led to the origin and development of Arbitration?
3. Necessity of arbitration clauses in contracts between parties.
4. What is submission agreement and the autonomy of the Arbitral Agreement?
5. What are the various conventions and the provisions that deal with the enforcement of foreign
arbitral award?
6. What are the issues related to Enforcement of foreign award in India?
7. What is the concept of Public Policy?
8. Why should there be a limitation on judicial review of Arbitral Awards?
 WHAT IS ARBITRATION?

Arbitration plays a crucial juridical role in the new international merchant law (a law which is
elaborated and established by its own participants). Arbitration grants a true “opino juris” to the
practices regularly used in the business world.

Among the devices developed to help parties maintain contractual obligations is the adjudicatory
system of arbitration. Such systems are replacing the courts, since their reliance on custom
permits greater flexibility in decision making and they are considered to be more private,
economic, rapid, certain, and conducive to business relationships. 1 Arbitration has changed the
conditions of contract in modern society by allowing custom, rather than law, to be used in
situations where contractual relationships break down. Thus, arbitration works to insure
cooperation in modern society.

Meaning of Arbitration

Arbitration has been in existence for centuries as a method for settling disputes between
merchants. But in recent years, accompanying a great expansion of international trade—both in
volume and geographically—international commercial arbitration is used extensively as an
alternative to litigation, and arbitration clauses are common in international business agreements.

Arbitration is a binding, non-judicial, and private means of settling disputes based on an explicit
agreement by the parties involved in a transaction. Such an agreement is typically embodied in
the terms of a contract between the parties. Alternatively, if the contract is silent about the
dispute-resolution method, the parties can select the method when the dispute arises.2 Arbitration
entrusts the settlement of a question to one or more persons who derive their powers from the
private agreement.3 Unlike judges in public courts, who must follow fixed rules of procedure and

1
Robert L. Bonn, “Arbitration—An Alternative way for Handling Contract-related Disputes”, Administrative Science Quarterly,
17(2), 254-264, at p.255, sourced from http://links.jstor.org/sici?sici=0001-8392%28197206%2917%3A2%3C254%3AAAASFH
%3E2.0.CO%3B2-B
2
Even if the parties have contractually agreed to use one method, they may switch to another if they feel that the latter is more
appropriate for a given dispute.
3
Lord Mustill, Stewart C Boyd, Commercial Arbitration, (2nd Edition, London: Butterworths, 2001)
apply the laws of the land, arbitrators can dispense with legal formalities and may apply
whatever procedural rules and substantive law best fit a case.4

It is important to note that commercial arbitration is an extrajudicial procedure. It is adopted by

the parties to settle, upon their merits and through a tribunal selected, by the parties themselves,
commercial disputes arising between them out of a contractual relationship. It differs from
litigation, in that it is not conducted under the direction of courts of law, but by a tribunal of the
parties’ own choosing, bound to conduct an impartial hearing. It is less formal, less costly, and
speedier in its results than litigation. It differs from both mediation and conciliation, in that it
decides the issue on its merits and does not attempt to effect a compromise.

Origin of Arbitration

The use of contracts and contract law may vary a great deal depending upon their social and
economic contexts. Clearly, the society is moving from Status to contract, as Sir Henry Maine
aptly pointed out. The law which gives corporations the same rights as individuals has led to a
system in which each may enter into contractual obligations with one another. This has led to a
number of contracts which otherwise would not have been formed, while creating a host of
problems ranging from the power inequity present in the bargaining situation where individuals
and corporations are involved (as evidenced in the contract of adhesion) to the lack of real
bargaining in standardized contracts, between the parties The use of contracts in modern society
has also been influenced by the increasingly complex relationships among various organizations
of society.5 Accompanying these changes in the contract law, have been several important
developments within and outside the legal system. Legislatures began to dispense equity and
justice on an ad hoc basis through the system of private laws.

Arbitration vis-à-vis the Legal System

4
Alan Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration, (4th edn., South Asian edn.,
London: Sweet & Maxwell, 2004), at p.1
5
See: John R. Abersold, “Commercial Arbitration—A Practical Plan”, Annals of the American Academy of Political and Social
Science, 148(Part 1: Real Estate Problems), 247-282, sourced from http://links.jstor.org/sici?sici=0002-
7162%28193003%29148%3C247%3ACAAPP%3E2.0.CO%3B2-T.
Although the private system of arbitration developed outside the public legal system and is often
used as a device to avoid formal court action, it depends on the public legal system for its
effectiveness. The courts as well as the national and local laws have guaranteed the integrity of
the arbitration process by recognizing the contract to settle a dispute by arbitration as a valid
contract in its own right6. The provision allowing for the arbitration of future disputes leaves the
courts in the paradoxical position of recognizing the legality of a contract not to use the courts to
resolve disputes.

Nevertheless, the courts have accepted the concept of arbitration and even reinforced it through
the legal doctrine of severability. This doctrine provides for the arbitration clause in a contract to
be treated as a contract in its own right, one which is separate and antecedent to the particular
contract which exists between the parties.7 In practice, this has come to mean that arbitrators can
make decisions not only on factual matters, but also on matters previously regarded as within the
sole province of law-for example, the fraudulent inducement of a contract. Perhaps the real key
to the effectiveness of arbitration lies in the fact that the provisions of an arbitrator's award can
be enforced judicially under common or statutory law.8 Thus, in those cases where neither
voluntary compliance nor possible trade sanctions are sufficient to compel the losing party to
comply with the terms of an award, the winner can resort to legal action. While the details of this
procedure vary according to state or local jurisdiction, compliance is relatively easy to obtain and
often is achieved simply by having the court place its seal on the arbitral award, thereby giving it
the status of a court decree.9 Moreover, courts guarantee the effectiveness of the arbitration
process by making it virtually impossible for the loser to appeal an arbitration award, especially
on the grounds that its substantive merits are defective.10

In any event, the court is in the paradoxical position of supporting arbitral awards which may not
necessarily take legal precedent, legal considerations, or even equity into account.

6
For example, Section 7 of the Arbitration and Conciliation Act, 1996
7
Section 16(1) of Arbitration and Conciliation Act, 1996 for instance. This particular provision captures the doctrine of
kompetenz-kompetenz, i.e., the power of the arbitral tribunal to rule on its own jurisdiction.
8
Sections 35 and 36 of the Arbitration and Conciliation Act, 1996.
9
Section 36 of the Arbitration and Conciliation Act, 1996 which states that Where the time for making an application to set aside
the arbitral award under award shall be endorsed under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if
it were a decree of the Court.
10
Section 34 of the Arbitration and Conciliation Act, 1996.
Advantages and Disadvantages of Arbitration

The increasingly widespread use of arbitration to handle contract related disputes can be
explained by the advantages the system enjoys in comparison to court litigation. Its chief
advantage is the use of decision makers who are experts in the subject matter in dispute. An
arbitration hearing is more flexible than a court of law where expert testimony can only be
introduced through the somewhat cumbersome system of expert witnesses. When this expertise
is combined with the relative absence of restraints on the arbitrator—especially in the area of
evidence admitted to the forum, the manner in which he conducts the hearings, and the lack of
binding precedents—the system of arbitration shows a flexibility which the public legal system
does not enjoy.11 The principles guiding the dispute resolution process can thus rest on custom
rather than on law whether it be trade custom, as in commercial arbitration, or custom of the
shop, as in labor arbitration Other advantages of arbitration over law frequently cited by
commentators on the arbitration process are economy, speed, secrecy, certainty, and maintenance
of business relationships.

Arbitration is economical because it can dispense with lawyers and expert witness fees, and its
speed means that less time need be spent on particular cases. It is faster because crowded court
dockets often result in delay. It provides secrecy, since it is not a public forum and, unless
specifically requested by the parties themselves. Neither records nor transcripts of hearings are
maintained. It affords more certainty because of the absence of the possibility of legal appeal.
Finally, many argue that due to its speed, economy, and flexibility, parties are able to maintain a
business relationship, while they settle a dispute that has a risk between them.12

There are, of course, disadvantages of arbitration too. The main one is that awards may ignore
important rules of substantive or procedural law and yet the parties may have no recourse to
court action.13

It should be noted, that arbitration is not used in all disputes, especially those in which the public
interest in manifestly involved, such as in antitrust or restraint of trade cases. Nor is it used to

11
Supra., note 4, at p. 24.
12
Supra., note 4, at pp. 25-28.
13
Supra., note 1.
create agreements between parties. It is rather used to restore equilibrium when contractual
agreements have broken down for one reason or another. Thus, arbitration appears to be
gradually, but effectively, subsuming the work of the courts and, for this reason, it can
appropriately be regarded as an important institution of dispute resolution.14

Uses of Arbitration

In modern society, there are a number of situations in which arbitration has been used in lieu of
court action. In the important area of labor relations, arbitration has been used with considerable
success to handle grievance procedures. Arbitration has also been used in such diverse contexts
as landlord-tenant disputes, motor accident claims, divorce proceedings, and the liquidation of
partnerships or employment contracts that executives make with their employer firms. In
addition to this is the widespread use of arbitration in the business community.

Thus, Arbitration as an important device for handling contract related disputes. It is thought to be
more flexible than the law. It allows custom to play a large role in decision making and gives
decision makers wide latitude in conducting case hearings. It is considered to be and is, to some
extent, cheaper, faster, more private, more certain, and more conducive to future business
relationships than court litigation. Arbitration is a device for handling contract related disputes in
a society that is increasingly organized and which is increasingly in need of more effective
agencies of social control.

14
Supra., note 5
 MEANING OF INTERNATIONAL COMMERCIAL ARBITRATION

The ever-increasing trade across national frontiers in the 20th Century has inexorably led to the
growth of a new lex mercatoria which is neither public nor private international law. It is law sui
generis.15 International Commercial Arbitration is an important segment of this law.

In the domestic context parties who seek a binding method of resolving disputes through third-
party intervention have the choice between a national public court and private arbitration. In the
international context such a choice does not exist because there are no international public courts
that handle international commercial disputes involving only private parties. Therefore, the
choice for international private parties is between recourse to a national court (that is, litigation)
and recourse to private international dispute resolution, namely international commercial
arbitration or so-called alternative dispute resolution (ADR) techniques, such as conciliation and
mediation.16 Arbitration becomes international when the parties to a dispute reside or conduct
their main business in different countries. The term commercial in international commercial
arbitration is broadly conceived and covers activities such as sale of goods, distribution
agreements, commercial representation of agency, leasing, consulting, transportation,
construction work, joint ventures, and other forms of industrial or business cooperation.17

International Commercial Arbitration - What is it?

Whereas the domestic arbitrations are regulated by national law, the international commercial
arbitration (hereinafter referred to as "ICA") is governed by a variety of laws: national law,
comparative law, international conventions, and even usages of international trade. The term
“international” is used to mark the difference between arbitrations which are purely national or
domestic and those which in some way transcend national boundaries and so are international, or
in the terminology adopted by Judge Jessup, “transnational”.18

15
Hussain M. Al-Baharna, “International Commercial Arbitration in Perspective”, Arab Law Quarterly, 3(1), 3-18, at p. 17,
sourced from http://links.jstor.org/sici?sici=0268-0556%28198802%293%3A1%3C3%3AICAIP%3E2.0.CO%3B2-I
16
Id.
17
RM Investment and Trading Co. Pvt. Ltd. v. Boeing Co., AIR 1994 SC 1136
18
Supra., note 4, at p. 12.
The expression ICA is really a compound of “commercial” and “international arbitration”.
Accordingly, the ICA can best be defined by defining the twin elements: “commercial” and
“international arbitration”. This is how the UNCITRAL Model Law on International Commercial
Arbitration (“Model Law”) appears to define the ICA too.

The concept of a commercial contract is of importance in the civil law as regards arbitration,
since in some countries only disputes arising out of commercial contracts may be submitted to
arbitration.19 The fact that in some countries arbitration is only permissible in respect of
commercial contracts, while in others there is no such limitation, was given international
recognition many years ago in the Geneva Protocol of 1923.20 The “commercial reservation”,
i.e., the stipulation in the Protocol that each contracting state may limit its obligations to
“contracts that are considered as commercial under its national law”, appears in the New York
Convention too.21 The term “commercial” has, under the Model Law, been assigned a wide
meaning so as to include its ambit trade, financial, engineering and other transactions.22

Similarly, the term “international arbitration” has also been given an extended meaning so as to
include within its range a variety of different situations. Two main criteria—the international
nature of disputes and the nationality of parties—are used to define the term “international” in
the context of ICA.23 The Court of Arbitration of the International Chamber of Commerce has
adopted the first criterion for deciding whether or not arbitration was an “international
arbitration” under its rules. The present Rules define the function of the International Court of
Arbitration of the ICC as being to “provide for the settlement by arbitration of business disputes
of an international character.”24 The second criterion involves reviewing the nationality, place of
residence, or place of business of the parties to the arbitration agreement. It is an approach that
was adopted in the European Convention of 1961.25 Switzerland is an example of a country in

19
Supra., note 5, at p.250.
20
Supra., note 4, at p.17. Article 1 of the Geneva Protocol of 1923. The Geneva Protocol obliged each contracting state to
recognize the validity of an arbitration agreement concerning disputes that might arise from a “contract relating to commercial
matters or to any other matter capable of settlement by arbitration.”
21
Article 1.3 of the New York Convention.
22
Supra., note 4, at p. 18. The definition appears as a footnote to Article 1(1), which states that the Model Law applies to ICA.
23
Supra., note 4, at p. 16.
24
Article 1(1) of the ICC Arbitration Rules.
25
Supra., note 4, at p.15.
 which the nationality of the parties determines whether or not arbitration is “international”.26 The
“nationality” test is also used by the United States for the purposes of the New York Convention,
but arbitration agreements between US citizens or corporations are excluded from the scope of
the Convention.27 Under the Model Law, if the parties have their places of business in different
States, or if the place of arbitration is situated outside the places of business of the parties, or if
the subject-matter of the arbitration agreement is related to more than one State, the arbitration in
that case would be international.28 Thus, the Model Law combines the two aforementioned
criteria.

In the light of the Model Law, we can define the ICA as an arbitration of commercial, financial
and engineering disputes of parties belonging to different States who consider it expedient to
choose a venue of arbitration different from their place of business, or the contract or agreement
in question relates to more than one State. In other words, the elements that render arbitration
international are the “parties”, “place of arbitration” and “nature of the business transaction”. It
goes without saying that there is a strong transnational element in the ICA. It is the presence of
this element that induces the parties to a contract or agreement to opt for the ICA.

Indeed, the exigencies of international trade and development which are predicated upon the
mutual confidence of the parties to a contract or agreement oblige them to accept the ICA.
Parties which are reluctant to accept the ICA might run the risk of forfeiting business, investment
or development, as the case may be.

Significant features of International Commercial Arbitration

The significant features of ICA may be enumerated as follows

1. The agreement by the parties.

26
Id.
27
Supra., note 4, at p.16.
28
The definition adopted in Article 1(3) of the Model Law is as follows:
1(3) An arbitration is international of—
(a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in
different States; or
(b) one of the following places is situated outside the State in which the parties have their places of business:
(i) the place of arbitration is determined in, or pursuant to, the arbitration agreement;
(ii) any place where a substantial part of the obligations of the commercial relationship is to be performed or the place
with which the subject-matter of the dispute is most closely connected; or
(c) the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country.
 2. The Choice of arbitrators.
3. Specialized knowledge and experience.
4. Enforcement of the Arbitral award.

Agreement by the Parties—Arbitration requires the agreement of the parties, and cannot exist
without it. This agreement is frequently incorporated in a basic international contract covering
the transaction, and this means that a choice of the mode of dispute settlement may be agreed
upon at the time when a deal is made and before there has been any dispute.

Choice of Arbitrators—In arbitration the parties can choose their own person or persons to
adjudicate the dispute between them. The fact that in arbitration, the parties are free to choose
their own tribunal distinguishes arbitration from litigation.29

Specialized Knowledge and Experience—An international business dispute may turn

substantially (or perhaps entirely) on the facts, and also it may very well be concerned with the
interpretation and effect of specialized documents and the customs and practices of particular
kinds of business. Arbitration allows the parties to choose an arbitrator who has had experience
of international commercial arbitrations and has specialized knowledge of relevant areas of
commercial law, or experience in the kind of business involved in the dispute. Examples might
include marine insurance, engineering, construction and advanced technology.

Enforcement of the Arbitral Award—A major advantage of international commercial arbitration

as compared with national litigation is in regard to enforcement. International conventions, and
in particular the New York Convention, together with legislation based on the Convention, have
provided facilities for the enforcement of foreign awards, having greater range and flexibility
than exist so far in regard to court judgments. This is, of course, an important consideration
where the assets of parties may be situated in different countries and transnational enforcement is
desired. There are long-standing problems and limitations in the transnational enforcement of
court judgments, possibly related mainly to feelings about national sovereignty.

29
Supra., note 3, at p.9.
Thus, we see that ICA begins as a private agreement between the parties. It continues by way of
private proceedings, in which the wishes of the parties are of great importance. Yet, it ends with
an award that has binding legal force and effect which on appropriate conditions, the courts of
most countries of the world will recognize and enforce. The private process has a public effect,
implemented with the support of the public authorities of each State and expressed through its
national law.
 ARBITRAL AWARD

What is an arbitral award?

The question is an old one that, in recent years has gained increasing attention as UNCITRAL
and others have considered the issues relating to interim measures and their enforcement.
Nevertheless, neither the New York Convention nor most arbitration rules or statutes, including
the UNCITRAL Model Law, contain a definition of an "award", and there is no international
consensus on this subject. Obviously, the final award of an arbitral tribunal in an arbitration can
easily be recognized as an award, but what about all of the other decisions that arbitrators may be
required to make during the course of an arbitration, from decisions on jurisdiction (there has
been a debate about negative decisions on jurisdiction, in particular) to decisions on the
governing law or other preliminary issues?

As an illustration of the difficulties that may be encountered, when at the ICC, in the case that
became a proceeding before the French courts called Cubic Defense Systems, Inc. v.
International Chamber of Commerce, an ICC arbitral tribunal sitting in Zurich rejected the time
bar defenses of Cubic in the arbitration by means of a procedural order. The question was
whether the arbitral tribunal should have done so by rendering a partial award on that subject.
Cubic, thus, complained to the ICC that the Tribunal's decision should have taken the form of an
award and, thus, been scrutinized and approved by the ICC Court, in accordance with the ICC
Rules. The arbitral tribunal, however, took the view that under Swiss law their decision was not
actually an award because it did not finally dispose of any claim. Cubic subsequently sued the
ICC for, among other things, refusing to require the arbitrators to convert their order into an
award. The French courts, however, found that the ICC had no such duty.

In contrast to the Swiss position, the French courts have embraced a broader definition of an
award. Decisions that finally settle litigious issues between the parties may, thus, be regarded as
awards, and in one well-known case (Braspetro), the French courts requalified as an award a
procedural order of an ICC tribunal refusing to reconsider an arbitration award where it was
alleged that it had been fraudulently procured.
Obviously, the view that a court takes with respect to whether a particular decision is to be
considered as an award will affect the question of whether any judicial recourse is available
against it.

Foreign award defined

In order to be considered as a foreign award, (for the purposes of the Act) the same must fulfil
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 R.M. Investments Trading Co. Pvt. Ltd. v. Boeing Co. & Another30 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. 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.

Effect on award in case of disintegration of a country into separate political entities

In a case, an interesting issue came up before the Supreme Court of India as to what would
happen in a case where a Country has been notified but subsequently it divides or disintegrated
into separate political entities. This came up for consideration in the case of Transocean
Shipping Agency Pvt. Ltd. v. Black Sea Shipping & Ors.31 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
30 (1994) 4 SCC 541
31 (1998) 2 SCC 281
arbitrated in Ukraine (which was not notified). The question arose whether an award rendered in
Ukraine would be enforceable in India notwithstanding the fact 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 avtar also. At
another level the judgment demonstrates the willingness of Indian courts to overcome
technicalities and lean in favour of enforcement.
 ARBITRATION CLAUSE IN A CONTRACT & SUBMISSION AGREEMENT

The arbitration clause in contract32 is the key factor to the existence of every arbitration. It would
not be possible for the parties to undergo the arbitration process in the absence of any valid
contract to settle their disputes before an arbitral tribunal.

The contract records the consent of the parties to submit to arbitration, a consent which is
indispensable to any process of dispute resolution outside national courts. The Arbitration
process and other methods of Alternate Dispute Resolution (ADR) depend for their very
existence upon the agreements of the parties. Compulsory arbitration does exist. Nevertheless,
the consent of the parties remains the essential basis of a voluntary system of ICA.

The UNCITRAL Model Law defines an Arbitration Agreement

“Arbitration Agreement” is an agreement by the parties to submit to arbitration all or certain

disputes which have arisen or which may arise between them in respect of a defined legal
relationship, whether contractual or not. An arbitration agreement may be in the form of an
arbitration clause in a contract or in the form of a separate agreement.33

There are two basic types of arbitration agreements - the arbitration clause and the submission
agreement. An arbitration clause looks to the future, whereas a submission agreement looks to
the past.34 The first, which is most common, is usually contained in the principle agreement
between the parties and is an agreement to submit future disputes to arbitration. The submission
agreement, on the other hand, is an agreement to submit existing disputes to arbitration.

Reference to Arbitration by the Parties

Voluntary arbitration is the process in which two parties to a dispute agree to submit their
differences to one or more impartial persons for a decision which both parties agree to accept as
binding upon them. In the field of international trade, it is customary for those sellers and buyers

32
Here ‘Contract’ and ‘Agreement’ are interchangeable
33
Article 7(1) of the UNCITRAL Model Law
34
Supra., note 4, at p.133.
who wish to use arbitration as a method of settling their disagreements to include a clause in the
contract of sale and purchase which provides for arbitration. It is therefore important that
merchants know about the laws of the countries with which they trade pertaining to the validity
of arbitration clauses. An arbitration clause in the contract is without value if, when a dispute
arises, either party to the contract can refuse to arbitrate and be able in that way to avoid an
obligation which he has undertaken at the time that he has made a purchase or sale. 35 When a
dispute arises, there is the danger that the party with a weak case may refuse to abide by the
agreement to arbitrate. He may prefer to go to court where he call drag out the case and perhaps
even obtain a favorable decision on a legal technicality quite remote from the merits of the case.

The laws of the different countries of the world pertaining to arbitration are not uniform in most
of the important fundamentals.36 Different countries have different laws pertaining to the validity
of and to the methods of enforcing the arbitration clause. There are some international
agreements whereby groups of countries recognize the validity of arbitration clauses in
commercial contracts between their nationals. The merchant should know something of this so
that when he enters into a contract of purchase or sale which includes an arbitration clause he has
some understanding, first as to how the clause should be worded in order to comply with the
laws of the countries of sale and purchase and, secondly, whether or not the laws of these two
countries will recognize the validity of the clause if a dispute afterwards arises and either party
seeks to avoid arbitration as the method of settlement.37

A statement can fairly be made that the laws of most of the important international trading
countries recognize the validity of an agreement relating to the arbitration of either existing or
future disputes, and that if a businessman signs a contract which includes an arbitration clause
and afterwards tries to take the case to court instead of submitting it to arbitration, the courts of
most of these countries will refuse to allow a court trial.

35
Supra., note 15.
36
William W Park, “The Lex Loci Arbitri and International Commercial Arbitration”, The International and Comparative Law
Quarterly, 32(1), pp.21-52, (January 1983), sourced from

37
Supra note 15
Arbitration Agreement

An arbitration agreement confers a mandate upon the arbitration tribunal to decide any and all of
the disputes that come within the ambit of that agreement. It is important that an arbitrator should
not go beyond this mandate.

In addition to having an understanding of just how the laws will affect them, it is important for
the businessmen to understand how to word the arbitration clause that they use in their contracts.
It is important to ensure that the wording adopted in an arbitration agreement is adequate to
fulfill the intention of the parties.38 Careless or improper wording might cause the courts of some
countries to declare the clause invalid despite the general provisions of the law upholding the
validity of such clauses. And the highly important question whether jurisdiction can be obtained
over a non-resident of the state or country in which the arbitration is to be held may frequently
hinge on the wording of the arbitration clause.

Arbitration clauses are usually drawn in wide terms to ensure that all disputes which arise out of
or in connection with a particular contract or contractual relationship are referred to arbitration.
Accordingly, the arbitration agreement should be drafted in broad, inclusionary terms, rather
than referring only certain categories of dispute to arbitration and leaving others to the
jurisdiction of national courts. Linking words such as “in connection with”, “in relation to”, “in
respect of”, “with regard to”, “under” and “arising out of”, are very important in any dispute as
to the scope of an arbitration agreement. These words come to rescue in deciding whether a
particular dispute falls within the mandate granted to the arbitrators. It is important since an
award passed by the arbitrator or an arbitration tribunal may be set aside by a competent court if
it deals with a dispute not contemplated by or not falling within the terms of the submission to
arbitration or contains decisions on matters beyond the scope of the submission to arbitration.39

38
Supra., note 4, at p.153
39
Article 34(2)(iii) and Article 36(i)(a)(iii) of the UNCITRAL Model Law.
Moreover, there are certain disputes which cannot be resolved by arbitration, since for public
policy reasons, national laws will regard certain matters as more suitable for settlement by
Courts than by a private system of dispute resolution such as ICA.40

Where parties agree to put an arbitration clause into their contract, they usually select a standard
form or “model” clause, either from one of the arbitral institutions or from an internationally
recognized authority such as UNCITRAL. These model clauses are widely drawn.

For example, the Model UNCITRAL Arbitration clause reads as follows:

“Any dispute, controversy or claim arising out of or relating to this contract, or the breach,
termination or invalidity thereof, shall be settled by arbitration in accordance with the
UNCITRAL Arbitration Rules as at present in force.”

In an accompanying note it is further provided as follows:

“Parties may wish to consider adding:

(a) The appointing authority shall be ... . . ... . . (name of institution or person);

(b) The number of arbitrators shall be ......... (one or three);

(c) The place of arbitration shall be ...........(town or country);

(d) The language(s) to be used in the proceedings shall be ........................”

Similar language is used in the ICC41 and other model forms too. Where such arbitration clauses
are adopted, most national courts will recognize and give effect to the parties’ wishes to arbitrate
any arbitrable dispute between them.42 These model clauses bring with them a set of rules that

40
Supra., note 4, at p. 19. For example, a dispute over matrimonial status may be regarded by the law of a particular state as not
being “capable” of settlement by arbitration.
41
ICC model clause reads thus: “All disputes arising in connection with the present contract shall be finally settled under the
rules of conciliation and arbitration of the International Chamber of Commerce by one or more arbitrators appointed in
accordance with the rules.”
42
Supra., note 4, at p.165.
are self-sufficient, and which should be enough to guide the arbitral tribunal and the parties from
the beginning to the end of the arbitral process.

The appointment of arbitrators, the law governing the process of arbitration, the choice between
ad hoc and institutional arbitration, the procedures to be followed, and other related matters may
be put in the arbitration agreement.

In some jurisdiction it is important that the arbitration clauses specifically provide for the extent
of the powers of the arbiters. Some laws limit the arbiters to decisions based strictly on the
commercial laws of the country in which the arbitration is held. Other arbitration laws allow the
arbiters to decide cases on the merits without regard to the law. It is also well to include the
clause in each contract of sale and purchase. It is unwise to attempt to provide for arbitration by
general reference to some other written understanding between the parties or by reference to the
contract being subject to the rules of a trade association which has arbitration rules and acts as an
arbitral tribunal.
 AUTONOMY OF THE ARBITRAL AGREEMENT

Separability of the Arbitration Clause

The doctrine of separability recognizes that the arbitration clause is separate, independent and
distinct from the main contract. The essence of the doctrine is that the validity of the arbitration
clause is not dependent upon the main contract and vice versa. Hence, the invalidity of the main
contract does not automatically result in the invalidity of the arbitration agreement.

The main practical advantage of the separability principle is that it constitutes a serious bar, for a
party who desires delay or wishes to repudiate his arbitration agreement, to subvert the
arbitration clause by questioning in court the existence or validity of the arbitration agreement,
by questioning the validity of the main contract.43 Separability ensures that if one party claims
that there has been a total breach of contract, the contract is not destroyed for all purposes, but
instead survives for the purpose of measuring the claims arising out of the breach, and the
arbitration clause survives for determining the mode of their settlement.44

The doctrine of separability is endorsed by institutional and international Rules of Arbitration

too. For example, Para 2 of Article 21 of the UNCITRAL Arbitration Rules states:

“For the purposes of Article 21, an arbitration clause which forms the part of the contract and
which provides for arbitration under these Rules shall be treated as an agreement independent of
the other terms of the contract”.

The question of separability has given rise to many court decisions in several countries. These
decisions and arbitral awards dealing with the question tend towards recognition of the
separability doctrine.45 It is submitted that the main purpose of the doctrine is to prevent
frustration of ICA by simply contesting the validity of the main contract. The broad wording of
the UNCITRAL Model clause also endorses the separability doctrine.

43
Supra., note 4, at p.162.
44
Heyman v. Darwins Ltd., [1942] A.C. 356.
45
Prima Paint Co. Ltd. v Flood and Conklin Manufacturing Corp., 388 U.S. 395 (1967).
An independent arbitration clause give the arbitral tribunal a basis to decide its own jurisdiction,
even if it is alleged that the main contract has been terminated by performance or by some
intervening event.

Relevant Case Law

The applicability of the doctrine of separability is illustrated in the case of PIATCO v. The
Government of the Philippines. The dispute between the parties arose from a project involving
the construction of the third terminal building of the Ninoy Aquino International Airport. The
dealings between the parties resulted in the conclusion of various concession agreements,
including a 1997 concession contract, an amended and restated concession agreements (ARCA).
Section 10.2 of the ARCA contains the arbitration agreement wherein it provides that all
disputes, claim or controversies arising from or relating to the construction of the said project
shall be settled by arbitration under the Rules of Arbitration in the Singapore-based International
Chamber of Commerce. Yet when the terminal was practically ready to start operations, the
Philippine Government advised PIATCO that the award of the project and the concession
contracts to the latter were null and void. In response, PIATCO filed its request for arbitration
before the International Chamber of Commerce (ICC). However, during the pendency of the
arbitration before the ICC, the Supreme Court of the Philippines, in the case of Agan v.
PIATCO,46 declared the ARCA which contained the arbitration agreement null and void for
being violative of public policy. The Philippine Government anchored its argument on the
nullification of the ARCA in its objection of the ICC’s jurisdiction over the case. In the main, it
is asserted that the Court’s nullification of the ARCA necessarily nullified the parties’ reference
to the ICC arbitration contained in that agreement. In a decision penned by Singapore High Court
Judge Judith Prakash in a motion to set aside the partial award of the Arbitral Tribunal regarding
the law governing the arbitration agreement, it rejected the argument, applying the principle
of severability or separability. It held that the arbitration agreement survived despite the Supreme
Court’s nullification of the main contract.47

46
Agan et al. v. PIATCO et. al., 402 SCRA 62 (2003).
47
Government of the Philippines v. PIATCO, SGHC 206 (2006), http://lwb.lawnet. com.sg/legal/lgl/rss/supreme
court/51718.html
 ENFORCEMENT OF FOREIGN ARBITRAL AWARD – GLOBAL VIEW

It is very important to note that, however successful the arbitration is, the failure of a party to
enforce the award in foreign country really takes away the fruits of arbitration. Only when a
successful party can have recourse to its award without any hindrance in a foreign court to
enforce the same arbitration will have real advantage over the litigation. The movement toward
multilateral and specialized treaties on commercial arbitration can be traced back to the decade
preceding the First World War. The question appeared on the agendas of International Congress
of chambers of commerce in 1904 (Milan) and 1914 (Paris) and its was discussed in 1912
(Boston) meeting of the International Federation of Cotton Industries. Immediately after the war
the League of Nations became interested in commercial arbitration through its Economic
Committee, whose English member, Sir Herbert Llewellyn Smith seems to have taken the
initiative. At the same time the newly founded International Chamber of Commerce (ICC) in
connection with its plan for international Court of Arbitration, keenly sponsored the promotion
of commercial arbitration through the League. The Geneva Conference specifically requested the
League to include the enforcement of foreign judgements in its program but the Committee
wisely decided to steer clear of this thorny topic.48

Two important multinational treaties on arbitration were concluded in 1923 and 1927 under the
auspices of the League of Nations. As early as 1923 the treaty was prepared by the League viz.,
Protocol on Arbitration Clauses, known as the Protocol. Under the Protocol, agreements for
present and future arbitration are valid that is irrevocable. And courts invoked in defiance of such
an agreement are placed under the obligation to stay proceedings and to refer the parties to the
decision of the arbitrators. In 1927 the Geneva Protocol was followed by convention on the
execution of foreign Arbitral Awards. The convention renders arbitral awards enforceable under
certain conditions within the countries of the signatory powers. Both treaties contain a diversity
of citizenship clause in as much as they apply only to “differences between parties subject
respectively to the jurisdiction of different contracting states". And also each state is at liberty to
exclude non-commercial matters from the application of the treaties.49

48
Harward Law Review Vol 56 (1952) Pg 220
49
45 Yale Law Journal (1935) pg 63
Looking back to the history of the enforcement of foreign award legislations one can trace the
works of League of Nations in this regard. Multinational treaties in commercial arbitration began
under the patronage of League of Nations. On Sept. 24, 1923, a protocol on Arbitration clause
was opened for signature at Geneva. This agreement, which came into force on July 25 th, 1924,
was ratified by thirteen states:50 and was subsequently acceded by 16 additional states. The
protocol recognized the validity of the submission to the jurisdiction of any of the signatories by
parties to an arbitration agreement. Protocol provided that the will of the parties and the law of
the country in which it takes place govern the arbitration procedure. Each contracting state
undertook "to insure the execution by its authorities and in accordance with the provisions of its
national laws of arbitral awards made in its own territory under the preceding articles. Protocol
stated that reference would not prejudice competence of the judicial tribunals in case the
agreement or the arbitration cannot proceed or becomes inoperative.

Soon after the Protocol, another Convention on Execution of Foreign Arbitral Awards was
concluded under the auspices of League of Nations. International Chamber of Commerce
initiated this treaty. It was entered into force on July 25th 1929. Legally binding 24 States, it
supplemented the Protocol. Under the Geneva Convention, awards made in the territory and
between persons subject to the jurisdiction of one of the signatories were to be "enforced in
accordance with the rules of procedure of the territory where the award is relied upon." 51 The
award to be valid to be final on the subject matter capable of settlement by arbitration under the
law of the country in which the award is sought to be relied on and not contrary to the public
policy or the principles of law of that country. Article IV provided the burden proof, it was with
the complaining party.

Representing a significant advance in the cause of international commerce, League of Nations

treaties effected important improvement in the lanes pertaining to the Arbitration. In the
international level the Geneva Convention under its Vth Article, absorbed a dozen of existing
bilateral treaties in so far as they provided for the enforcement of foreign awards. On the
municipal levels, some nations such as Switzerland automatically changed other laws when they

50
Belgium, Brazil, British Empire, France, Germany, Greece, Italy, Japan, Lithuania, Morocco, Panama, Romania,
Uruguay
51
Article I
ratified, while others like India, enacted implementing legislation. France, Poland, Sweden
incorporated principles of one or both of the treaties into their general law.
 GENEVA PROTOCOL & CONVENTION

Geneva Protocol on Arbitration Clauses 1923, sought to improve upon the chaotic condition by
providing for the compulsory recognition of arbitration agreements as between the contracting
states. No agreement was clear upon the question what law should govern the validity of
agreements for arbitration. The application of protocol is limited to the parties of different
contracting states. It did not include agreements between nationals of one contracting state for
arbitration in some other contracting state. According to the provisions of the Protocol awards
are entitled to compulsory enforcement only in the state where rendered and all other contracting
states are under a duty to stay any action brought in violation of the submission agreement, the
successful party in the arbitration would without any remedy of award could not be satisfied by
execution in the country in which it was rendered, and the award as such was not enforceable in
the state in which it was rendered, and the award as such was not enforceable in the state in
which the defeated party lives or has property. The provisions of the protocol of 1923 made an
International Convention for the Enforcement of foreign awards, therefore an absolute necessity.
As the Geneva Convention for the Enforcement of Foreign Arbitral Awards 1927, was to
supplement the Protocol 1923, the adoption of Protocol was made prerequisite to becoming a
party to the Convention. Adherence to the Convention however constitutes adherence to the
protocol. The Convention extends only to submission agreements falling within the Protocol,
which applies to agreements between parties of different contracting states, but not to submission
agreements between nationals of the same contacting state for arbitration for some other
contracting. The Convention lists the ground on which the party to the award can contest the
enforcement. An award my subject to impeachment in some countries on grounds other than the
specified in Article I and Article II of the Convention; for example because of irregularity of
procedure, perjury, forgery and the like. If the defendant establishes that such a ground exists
under the law applicable to the arbitral proceeding, the judge who may not be prepared to deal
with question closely connected with peculiarities of procedure in a foreign country, is privileged
under the terms of the Convention either to suspend the proceedings for enforcement, giving the
party a reasonable time to have the award set aside in the country in which it was rendered or
else if he is not allowed to suspend the proceedings under this law, to refuse enforcement. The
convention does not authorize the re-examination of the merits of the award, not even for the
purpose of determining whether the enforcement of the award would be against the public policy
of the forum.

The Geneva Convention 1927 had been put substantially into effect in England by Arbitration
(Foreign Awards) Act of 1930. It was likewise in force in North Ireland, in many continental
countries. So far as USA was concerned, the law of commercial arbitration had not yet then
reached that stage of legal development that adherence to any international Convention however
excellent would be possible.

In 1930’s the attempt to deal with the subject of commercial arbitration internationally was
premature. The divergences existing between the different countries as regards legislation,
business practices relating arbitration, and the relation between arbitration and courts were so
great, as to make any general Convention for the enforcement of foreign awards by legal process
impracticable. Because of these differences it was found necessary to restrict the application of
1927 Geneva Convention to awards rendered on the basis of Geneva Protocol of 1923. For
similar reason some of the most important provisions relating to enforcement of foreign awards
were either gone over insolence or left exceedingly vague.

Thus there was nothing in the Convention concerning the vexed problem of the effect of the
exercise of judicial control over awards, for, no formula acceptable to all could be found. Like
the earlier Protocol, the 1927 Convention also failed to state by what law, the validity of the
arbitration agreement is to be determined. The German Government proposed a specific
provision in this regard, but no agreement was possible and the matter was referred to Hague
Conference on Private International Law. Nor could an agreement be had, regarding the question
where an award made by correspondence should be deemed to be made. In view of the great
diversity in laws of different countries with respect to the question when an award has become
‘definitive’ no greater precision could be given to this condition, than its formulation in the
Convention. Regarding the question whether the foreign award can be impeached on account of
corruption, bias or misconduct on the part of an arbitrator, or an account of irregularities in
procedure, the Convention contains nothing beyond the general provision that if the award is
subject to impeachment in the state in which it was rendered, a foreign judge may decline to
enforce it, or may give to the defendant a reasonable time in which to have the award vacated in
foreign state. In the event that the foreign award is not subject to impeachment in state and which
it was made, enforcement may be denied under the Convention, if such enforcement would be
contrary to the public policy of the forum. It was recognized, of course, that an international
Convention was unable to lay down general rules for arbitral proceeding itself which must be
adjusted of necessity to the law of each state, such rules can be provided only, and with
difficulty, by bilateral treaties. No attempt was made either to regulate the procedure by which
the foreign awards are to be enforced. The questions whether it will be enforced by an action an
award, or by a form of exequatur52, or by summary procedure applicable to local awards continue
to depend therefore upon the law of the state in which the proceeding is pending.53

Appraisal of the Geneva Treaties

After having a look at the Geneva Conventions we can find that the effort of the League of the
Nations was commendable. Still the convention left many points unanswered. It had several
disadvantages in its practice. The following are the main points of criticism:

1. The diversity of citizenship clause;

2. The exclusion in the discretion of each government, of non-commercial matters;
3. Convention provision that the validity of arbitral agreement must be determined under the
law applicable thereto, that is surrender of this question to the local conflict of rules;
4. The abandonment of rules on the enforcement of foreign awards.

Among these the first criticism is more important. It was very troublesome clause because the
criterion, "subject respectively to the jurisdiction of different states" was very vague. The Italian
Courts have read their traditional nationality principle into the clause. English and German court
would have probably preferred domicile as the criterion. The whole question however remains
totally controversial.

The handicaps imposed upon the work of the League by the political situation, were the manifest
causes of the evident shortcomings of the treaties. Thus the diversity of citizenship requirement

52
It means an authorization granted by a secular ruler for the publication of papal bulis or other ecclesiastical
enactments to give them binding force. In this context it is the authorization granted by the Court declaring that the
award is final.
53
45 Yale Law Journal (1935) pg 65
apparently resulted from the unwillingness of the Italian, and other governments to recognize the
foreign awards rendered between their own subjects. Certainly he draftsman of the League could
not be blamed for the imperfections resulting from adversities of this type. Moreover, some of
the objectives advanced against the treaties were unwarranted in themselves.

Though the drafting of Convention was an excellent work. The Convention has not been a
success. The formidable amount of highly qualified labour, which went into their preparation,
has not been awarded by any perceptible progress in international commercial arbitration. The
arbitration is not necessarily reflected by court decisions, but experience shows that arbitration
except may be routine arbitration ministered by trade association frequently leads to judicial
incidents. Noteworthy were the discouraging experiences of the Court of Arbitration and
Conciliation founded in 1921 by the International Chamber of Commerce in Paris. This court
enjoyed the prestige and powerful support of the Chamber of Commerce and under its regulation
offered all guarantees of fairness, relative inexpensiveness and facile proceedings. The failure of
the court was very significant.

In USA, the American Arbitration Association (AAA) established a New York and London
Arbitration Service in 1932 and cooperating with the Pan American Union, the Inter American
Commercial Arbitration Commission 1934.Both enterprises were conspicuous failures. There
seems to have been only one award by Inter American Commercial Arbitration Commission
involving a sum of $ 661. Nothing is known of any actual arbitration proceedings of New York
and London Arbitration Service. The failure of the Paris Court reflects more directly the
inefficiency of the Geneva treaties since the aim of the court is similar in genesis and aim. In the
light of all these development it would seem that the men who set the course of League of
Nations in the matter of commercial arbitration misjudged the situation.54

54
(56) Harvard Law Review Pg 234
 THE NEW YORK CONVENTION

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 was the result of a conference of
plenipotentiaries that met at the Head Quarters of the United Nations in New York from May 20
to June 10, 1958. At its last day also a Resolution had been adopted the text of the Convention.
The purpose of the conference was also to consider, “if time permits”, “other possible measures
for increasing the effectiveness of the arbitration in the settlement of private law disputes”. At
the conference, a Committee was set up to study these “other possible measures”. On the basis of
the proposal made by the Committee the above-mentioned Resolution had been adopted.

The New York Convention is described as the most successful treaty in private international law.
It is adhered to by more than 140 nations. More than 1,400 court decisions reported in the
Yearbook: Commercial Arbitration show that enforcement of an arbitral award is granted in
almost 90 per cent of the cases.55

The Convention was established as a result of dissatisfaction with the Geneva Protocol on
Arbitration Clauses of 1923 and the Geneva Convention on the Execution of Foreign Arbitral
Awards of 1927. The initiative to replace the Geneva treaties came from the International
Chamber of Commerce (ICC), which issued a preliminary draft convention in 1953. The ICC’s
initiative was taken over by the United Nations Economic and Social Council, which produced
an amended draft convention in 1955. That draft was discussed during a conference at the United
Nations Headquarters in May-June 1958, which led to the establishment of the New York
Convention.

Background of the New York Convention

55
Article by Albert Jan van den Berg, Hanotiau & van den Berg, Brussels, Belgium, President, Netherlands
Arbitration Institute, Professor at law, Erasmus University, Rotterdam
The countries ratifying or acceding to the New York Convention agreed to recognize and enforce
foreign arbitral awards.56 The goal of the New York Convention “is to promote the enforcement
of arbitral agreements and thereby facilitate international business transactions on the whole.”57
The Geneva Protocol of 1923 on Arbitration Clauses and the Geneva Convention of 1927 on the
Execution of Foreign Arbitral Awards addressed foreign arbitration, but they were ineffective
and the United States was not a party to them.58 In 1953, in response to an international business
need for arbitration, the International Chamber of Commerce (ICC) asked the United Nations
Economic and Social Council to convene a meeting on the subject of international arbitration.59
At that time, the domestic law of the enforcing country usually governed the enforcement of
foreign arbitral awards.60 Without international standards to govern enforcement, parties neither
had a guarantee that the domestic courts would enforce their awards nor that the courts would
treat foreign and domestic awards equally.61 In addition, the use of arbitration to settle disputes
arising from international commercial transactions had increased, especially since no
international agreement on the enforcement of court judgments existed.62 Thus, enacting the New
York Convention could simplify the requirements for enforcing awards. 63 Despite the need for
international agreement on how to enforce foreign arbitral awards, only twenty-four countries
originally signed the New York Convention.64 However, over time, more countries have accepted
the New York Convention’s role in international commercial transactions.65

Under article I, the New York Convention applies to awards “made in the territory of a State
other than the State where the recognition and enforcement of such awards are sought” or to

56
Robert B. von Mehren, Enforcement of Foreign Arbitral Awards in the United States, 771 PLI/COMM 147, 156-
57 (1998)
57
Belship Navigation, Inc. v. Sealift, Inc., No. 1:95-CV-02748, 1995 WL 447656, at *5 (S.D.N.Y. July 28, 1995) (citing David
L. Threlkeld & Co. v. Metallgesellschaft Ltd., 923 F.2d 245, 248, 250 (2d Cir. 1991)).
58
Eloise Henderson Bouzari, Note, The Public Policy Exception to Enforcement of International Arbitral Awards:
Implications for Post-NAFTA Jurisdiction, 30 TEX. INT’L L.J. at 209 (1995).
59
Richard A. Cole, The Public Policy Exception to the New York Convention on the Recognition and Enforcement
of Arbitral Awards, 1 OHIO ST. J. ON DISP. RESOL., 368 (1985)
60
Elisabeth M. Senger-Weiss, Enforcing Foreign Arbitration Awards, 53-WTR DISP. RESOL. J. 70, 72 (1998).
61
Id.
62
This hypothetical is adapted from Andrew T. Guzman, Arbitrator Liability: Reconciling Arbitration and Mandatory Rules, 49
DUKE L.J. 1287 (2000).
63
supra note 57, at 72
64
Daniel Berkowitz, Johannes Moenius & Katharina Pistor, Legal Institutions and International Trade Flows, 26
MICH. J. INT’L L. 163, 176 & n.46 (2004). The countries included Argentina, Belarus, Belgium, Bulgaria, Costa
Rica, Ecuador, El Salvador, Finland, France, Germany, India, Israel, Jordan, Luxemburg, Monaco, the Netherlands,
Pakistan, the Philippines, Poland, the Russian Federation, Sri Lanka, Sweden, Switzerland, and Ukraine. Id.
65
supra note 57, at 72
awards “not considered as domestic awards in the State where their recognition and enforcement
are sought.”66 Thus, the New York Convention applies to awards rendered in a country other than
the enforcing country, whether the award is deemed domestic or international.67 It also applies to
all non-domestic awards in the enforcement country, whether or not the award may have been
rendered in that country.68 For example, if the award is rendered in England, then the United
States considers it to be a New York Convention award when the winning party attempts to
enforce it in the United States. However, countries interpret whether an award is non-domestic
differently.69 If the award does not fit the definition of a New York Convention award, then the
winning party can try to enforce the award under other treaties governing international
arbitration, such as the Convention on the Settlement of Investment Disputes Between States and
Nationals of Other States (“ICSID Convention”).70 To enforce a New York Convention award,
the winning party supplies an original or certified copy of the award and the arbitration
agreement to the enforcing court.71 This is significantly different from the League of Nation’s
Geneva Treaties, which placed the burden of proof on the party seeking to enforce the award.72
In addition, the New York Convention places the burden on the defendant to prove that the
award is invalid under at least one of the seven grounds it enumerates.73

Objectives of the New York Convention

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-.

66
Convention on the Recognition and Enforcement of Foreign Arbitral Awards art. I, June 10, 1958, 21 U.S.T. 2517,
330 U.N.T.S. 38 [hereinafter New York Convention]
67
supra note 57, at 73
68
Id.
69
Susan Choi, Note, Judicial Enforcement of Arbitration Awards Under the ICSID and New York Conventions, 28
N.Y.U. J. INT’L L. & POL. at 190-97 (indicating that U.S. and French courts interpret the term “non-domestic”
broadly while German courts interpret it narrowly).
70
Joseph T. McLaughlin, Enforcement of Arbitral Awards Under the New York Convention: Practice in U.S. Courts,
477 PLI/COMM 275, 301 (1988).
71
supra note 53, at 158; Choi, supra note 66, at 188-89s
72
See Bouzari, supra note 55, at 209; Choi, supra note 66, at 188-89.
73
supra note 53, at 158; Rosseel N.V. v. Oriental Commercial & Shipping Co. (U.K.) Ltd., (1991) 2 Lloyd’s Rep.
625, 628 (Q.B.D. Comm. Ct.) (Eng.) (indicating that the losing party must discharge the burden on a balance of
probabilities).
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 applied.

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.

As stated in the decision of US Supreme Court in Fritz Scherk v. Alberto Culver Co.74

"The goal of the Convention, and the principal purpose underlying American adoption and
implementation of it, was to encourage the recognition and enforcement of commercial
arbitration agreements in international contracts and to unify the standards by which agreements
to arbitrate are observed and arbitral award are enforced in the signatory countries."

Therefore the prime object of New York Convention was to ensure the recognition and
enforcement of the commercial arbitration agreements having international features and the
resultant foreign awards arising therefrom.

Basic Actions Contemplated by the New York Convention

The following briefly describes the two basic actions contemplated by the New York
Convention:

The first action is the recognition and enforcement of foreign arbitral awards, i.e., arbitral awards
made in the territory of another State; 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. The party against
74
(1974) 417 US 506
whom enforcement is sought can object to the enforcement by submitting proof of one of the
grounds for refusal of enforcement. The court may on its own motion refuse enforcement for
reasons of public policy. 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. 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-favourable-
right-provision of article VII, paragraph 1.

The second action contemplated by the New York Convention is the referral by a court to
arbitration. Article I, 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.

In both actions, the arbitration agreement must satisfy the requirements of article II, paragraphs 1
and 2, which include, in particular, that the agreement be in writing.

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
Convention provided impetus to the hugely successful UNCITRAL Arbitration Rules of 1976
and the UNCITRAL Model Law on International Commercial Arbitration of 1985 (as amended
in 2006). The New York Convention is probably the main reason why arbitration is the
preferred method for the resolution of international business disputes.

Key provisions of New York Convention

The Convention applies to awards made in any State other than the State in which recognition
and enforcement is sought. It also applies to awards “not considered as domestic awards”. When
consenting to be bound by the Convention, a State may declare that it will apply the Convention
(a) in respect to awards made only in the territory of another Party and (b) only to legal
relationships that are considered “commercial” under its domestic law.

The Convention contains provisions on arbitration agreements. This aspect was covered in
recognition of the fact that an award could be refused enforcement on the grounds that the
agreement upon which it was based might not be recognized. Article II (1) provides that Parties
shall recognize written arbitration agreements. In that respect, UNCITRAL adopted, at its thirty-
ninth session in 2006, a Recommendation that seeks to provide guidance to Parties on the
interpretation of the requirement in article II (2) that an arbitration agreement be in writing and to
encourage application of article VII (1) to allow any interested party to avail itself of rights it
may have, under the law or treaties of the country where an arbitration agreement is sought to be
relied upon, to seek recognition of the validity of such an arbitration agreement.

The central obligation imposed upon Parties is to recognize all arbitral awards within the scheme
as binding and enforce them, if requested to do so, under the lex fori. Each Party may determine
the procedural mechanisms that may be followed where the Convention does not prescribe any
requirement.

The Convention defines five grounds upon which recognition and enforcement may be refused at
the request of the party against whom it is invoked. The grounds include incapacity of the
parties, invalidity of the arbitration agreement, due process, scope of the arbitration agreement,
jurisdiction of the arbitral tribunal, setting aside or suspension of an award in the country in
which, or under the law of which, that award was made. The Convention defines two additional
grounds upon which the court may, on its own motion, refuse recognition and enforcement of an
award. Those grounds relate to arbitrability and public policy.
The Convention seeks to encourage recognition and enforcement of awards in the greatest
number of cases as possible. That purpose is achieved through article VII (1) of the Convention
by removing conditions for recognition and enforcement in national laws that are more stringent
than the conditions in the Convention, while allowing the continued application of any national
provisions that give special or more favourable rights to a party seeking to enforce an award.
That article recognizes the right of any interested party to avail itself of law or treaties of the
country where the award is sought to be relied upon, including where such law or treaties offer a
regime more favourable than the Convention.

Federal Courts address Enforceability under New York Convention

Two notable Federal Court cases have addressed the enforceability of arbitral awards per the
NYC. In 1999, in Baker Marine Ltd. v. Chevron Ltd., the Second Circuit reviewed the
enforceability of two arbitration awards that had been previously dismissed. The petitioner,
Baker Marine, a Nigerian Company, had contracted with two other parties, Danos and Chevron,
to provide support for Chevron's oil dealings in Nigeria. The contract required disputes to be
submitted to arbitration and governed by UNCITRAL and Nigerian law. Arbitral awards were to
be governed by the NYC.

A dispute later arose when Baker Marine alleged that Danos and Chevron breached their
contracts. Although Baker Marine successfully obtained two separate arbitration awards in
Nigeria, the Nigerian Federal High Court set them aside. Subsequently, Baker Marine attempted
to enforce the awards in federal District Court. The court refused to do so, "concluding that
under the Convention and principles of comity" it would be improper. On appeal to the Second
Circuit, Baker Marine noted that the NYC will not:

"deprive any interested party of any right he may have to avail himself of an arbitral award in the
manner and to the extent allowed by the law or the treaties of the count[r]y where such award is
sought to be relied upon." Art. VII (1).
Baker Marine asserted that the Nigerian court vacated the awards under a rationale not
recognized in the U.S. and that, for this reason, the Court may overrule the Nigerian court. In
response, the Court noted that the primary purpose of the F.A.A. is to ensure that private
arbitration agreements "are enforced according to their terms" and that the agreements
designated the application of Nigerian law. Stated differently, enforcing the dismissed awards
would essentially undermine one of the FAA's fundamental purposes.

Baker Marine also argued that the NYC implicitly gives the Court discretion to set aside the
dismissals. Specifically, Article V(1)(e) states that when a party seeks to confirm an award,
"'[r]ecognition and enforcement of the award may be refused' if the award has been set aside by a
competent authority of the country in which the award was made." Baker Marine asserted that
the use of the word "may" as opposed to a "mandatory term," gives the Court discretion to
overturn the Nigerian court. However, in response, the court merely indicated that this argument
was without merit.

In an another case, Glencare Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co. (Ninth Cir.
2002), the Ninth Circuit addressed the enforcement of arbitral awards in connection with due
process requirements. Specifically, the Court affirmed a federal District Court's decision
dismissing a request to enforce an award for lack of personal jurisdiction.

In Glencare Grain, a Netherlands corporation entered into a contract with Shivnath Rai, a
company incorporated in India, which included an arbitration clause subject to the NYC. (India
and the Netherlands are both members of the NYC). The arbitration clause required disputes be
submitted to arbitration with the London Rice Brokers' Association (LRBA) of Arbitrators or
their Umpire, and that English law would be controlling.

Subsequently, the parties attended arbitration regarding a rice delivery dispute, and in 1997 the
LRBA awarded Glencore Grain approximately $6.5 million. In 2000 Glencore Grain filed an
action in federal District Court in California, under the terms of the NYC, to enforce the award.
But that action was dismissed for lack of personal jurisdiction.
Before affirming the District Court's decision, the Court of Appeals noted that Glencore Grain
seemed to imply that the "FAA contemplates reduced jurisdictional requirements over a
defendant in suits to confirm arbitral awards." The Court conceded that the NYC implements a
"pro-enforcement" policy that leaves courts "with little discretion" and that the NYC does not
even directly address personal jurisdiction. However, despite the NYC's failure to address
personal jurisdiction, "[i]t is a bedrock principle of civil procedure and constitutional law that a
'statute cannot grant personal jurisdiction where the Constitution forbids it.'" In support of its
decision, the Court also drew upon established case law, a Second Circuit opinion directly
addressing the issue and some of its progeny.
 COMPARISON BETWEEN GENEVA CONVENTION 1927 AND NEW YORK
CONVENTION 1958

Comparison between the Geneva Convention 1927 and the New York Convention is summarized
in the following three points:

Firstly, under the New York Convention (under Article IV), the Party, applying for recognition
and enforcement of foreign award has to supply only,

(a) Original arbitral award or duly certified copy of it;

(b) Original arbitral agreement or duly certified copy of it in order to get enforcement of the award.

It is up to the party against whom enforcement is sought to prove that there is a ground for
refusal of the enforcement.

Under the Geneva Convention it is just the other way round, the party seeking enforcement has
to prove the fact that no reason for refusal exists. The burden of proof therefore has been
reversed. Exception has only been made for two reasons, mentioned in Para (2) of Article V, in
which cases the authorities in the country, where enforcement is sought may refuse enforcement
ex-officio when (a) the subject matter of the difference is not capable of settlement by arbitration
under the law of that country or (b) in that country the enforcement would be contrary to public
policy. Apart from these two reasons it is always the party against whom enforcement is sought
who will have to prove there is a ground for refusal. In comparison with Geneva Convention this
system constitutes an important improvement.

Secondly, the New York Convention text avoids double exequatur that was practically required
under the Geneva Convention. Under Geneva Convention the party seeking enforcement had to
prove the arbitral award was "final" in the country where it had been rendered. Therefore he was
practically under the obligation to ask an exequatur in that country too. Under New York
Convention he has only to supply the arbitral award and the arbitral agreement and if the
defendant wants to forestall the enforcement it is up to him to prove the court that, "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.

Finally, the New York Convention compared to Geneva Convention leaves parties greater
freedom to arrange their arbitration proceedings the way they like. Under the Geneva treaty these
proceedings had to be in accordance with both the agreement of the parties and, "the law
governing the arbitration procedure". According to New York Convention the enforcement of an
arbitral award may in this respect be referred only when it has been proved that: "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 agreement of
the parties or failing such agreement, was not in accordance with the law of the country where
the arbitration took place." This confers upon the parties considerably greater freedom to have
the arbitration conducted in the way they like it. They can in the arbitral clause in their contract
refer to existing arbitration rules or draft themselves elaborate rules for the arbitration
proceedings and the nomination of arbitrators and be practically certain that the arbitration, if
conducted in the way they preferred it, shall be enforceable.75

75
Pieter Sanders International Commercial Arbitration – World Handbook Vol II (1960) Matinus Nijhoff pg 295
 ENFORCEMENT OF FOREIGN ARBITRAL AWARDS IN INDIA

The growing strength and role of India and Indian Industry in the Asian and global economy has
seen the country’s emergence as a force to be contended with. Increasing foreign direct
investment and other forms of collaboration by foreign companies have also witnessed disputes
between Indian and foreign parties which gives rise to litigation or arbitration.

The traditional attitude of our courts towards arbitration had been paternalistic almost school-
masterly and with international arbitration, there was generally a lurking suspicion of a revival of
foreign dominance. In India, for instance, as regards the cases, which are not covered by the law
implementing the New York Convention (1958), the courts had exhibited (for too long) a marked
reluctance to cascade-jurisdiction of a claim arising under domestic law to a foreign or an
international tribunal. In contracts providing for resolution of dispute by arbitration outside India,
Indian courts frequently used their discretionary power under domestic arbitral law 76 to refuse a
stay of legal proceedings within their jurisdiction if such stay had been granted, it would have
enabled the foreign arbitral tribunal to proceed. The refusal to stay was rationalized on the
ground that the Indian party would be out to “inconvenience” and “hardship”. For instance, in
the case of Michael Golodetz v. Serajuddin & Co.77, the contract between an American Co. and
Indian Firm provided for resolution of disputes to arbitration at New York according to the rules
of American Arbitration Association the arbitration agreement could not be implemented only
because the Indian party filed a suit in India on the subject matter of dispute, and the Supreme
court of India refused to stay the suit in exercise of its discretion under Section 34 of Indian
Arbitration Act. The corresponding provision in the then operative Arbitration Protocol and
Convention Act 1937 could not be invoked since the United States was not a party to the Geneva
Convention.78

In Ramji Dayawala and Sons Pvt. Ltd. v. Invest Import79, a contract between the Indian Firm
and a party in Yugoslavia provided for the settlement of disputes by ICC court of International
Arbitration in Paris. India had ratified New York Convention but Yugoslavia had not.
76
Section 34 of Arbitration Act, 1940
77
AIR 1963 SC 1044
78
F S Nariman, in PC Rao’s ‘Alternative Dispute Resolution’ pg 47
79
AIR 1981 SC 2085
Accordingly, 1961 Act was held inapplicable and stay of the suit filed by Indian Firm (in India)
was denied to the foreign party and arbitration was aborted.

The 1940 Arbitration Act of India (1940 Act) was a dichotomy of sorts. While being expansive
enough to allow the recognition of oral arbitration agreements, it maintained the traditional
notion of superiority of courts over arbitrations and arbitrators and made specific provisions
allowing them to maintain a tight vigil over arbitration proceedings in the country. It did not
draw any distinction between international commercial arbitration with the seat in India and
domestic arbitration. In contrast, the 1996 Arbitration and Conciliation Act (1996 Act) while not
being generous enough to allow oral arbitration agreements (keeping in line with the Model law)
depicted a sea change of attitude towards arbitration which in some ways could be considered
even more progressive than the New York Convention (NYC). Moreover domestic courts too
with the passing of this Act shrugged off traditional notions, supervision and tight controls over
arbitration proceedings and enforcement of awards which, reflected in developing case law, can
only be termed as progressively enabling.
 EVOLUTION OF THE LAW OF ARBITRATION IN INDIA

A mechanism of arbitration existed in India even in the ancient times albeit in a rudimentary
form. The Arbitration Act 1899 incorporated various sections of the English Arbitration Act of
1889. For the first time it allowed future disputed along with existing ones to be referred to
arbitration. These provisions were later engrafted into the Code of Civil Procedure 1908(CPC) as
the Second Schedule. The Arbitration Act 194080 repealed the Arbitration Act 1899 and the
Second Schedule of the CPC. Between 1940 and 1996 the law of enforcement of arbitration
awards in India was spread between three enactments. Enforcement of domestic awards was
dealt with under the 1940 Act. Enforcement of foreign awards was divided between two statutes
a 1937 Act to give effect to Geneva Convention awards81 and a 1961 Act to give effect to the
New York Convention (NYC)82 awards. As the Geneva Convention became virtually otiose by
reason of Article VII of the NYC enforcement of foreign awards was under the 1961 Act and for
domestic awards was under the 1940 Act. The enforcement regime between these two statutes
was however quite distinct. The 1961 Act confined challenge to an arbitral awards only on the
limited grounds permitted under the New York Convention. The scope of challenge to domestic
awards under the 1940 Act was much wider. In January 1996 India enacted a new Arbitration
and Conciliation Act 199683 (hereinafter Act or Arbitration Act). This Act repealed all three
previous statutes. 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.

The salutary objective sought to be achieved by the Act was to minimize the supervisory role of
courts in the arbitral process. Referring to the 1940 Act Justice P.B.Mukherjee made a pertinent
remark ‘as for legislation the statute of arbitration is a jerry built structure suffering from divided
loyalties precariously balanced between sympathy with private courts of litigant’s choice and
nostalgia for public courts, which are expected to exercise a kind of paternal control over them.
This four fold curse has effectively laid its stronghold to make the law of arbitration a cripple

80
The Arbitration Act, 1940 (10 of 1940) (1940 Act)
81
Geneva Convention on the Execution of Foreign Arbitral Awards 1927. India became a signatory to this on 23rd
October 1937 (one amongst six Asian nations to become a signatory)
82
Foreign Awards (Recognition &Enforcement) Act, 1961 (45 of 1961)
83
The Arbitration & Conciliation Act, 1996 (26 of 1996)
which walks permanently on the crutches of legal precedents. It is no exaggeration to say that
almost every controversial arbitration of any importance always waits for a second bout of legal
fight in the public courts proving the truth of the old cynical statement and that only fools go to
arbitration because they pay two sets of costs one before the arbitration and the other before the
courts where they come home to roost.’84 Importantly in spite of the wide supervisory role which
the courts enjoyed, the courts had thoroughly advocated non-interference with arbitral awards. At
this juncture it is of extreme importance to keep in mind what the Supreme Court had held in the
cases cited below.

In State of Rajasthan v/s Puri Construction Co. Ltd. 85 the Supreme Court held: ‘over the
decades, judicial decisions have indicated the parameters of such challenge consistent with the
provisions of the Arbitration Act. By and large the courts have disfavoured interference with
arbitration award on account of error of law and fact on the score of mis-appreciation and
misreading of the materials on record and have shown definite inclination to preserve the award
as far as possible. This Court has held that the court does not sit in appeal over the award and
review the reasons.’

In State of UP v. Allied Constructions86 the Court held: ‘the arbitrator is a Judge chosen by the
parties and his decision is final. The court is precluded from reappraising the evidence.’ Thanks
to a 2003 Supreme Court Judgment (which shall be elaborated upon later) the ‘new’ law on the
subject has begun to resemble the ‘old’ law.

In order to eliminate the vices of unnecessary litigation the framers of the 1996 Act incorporated
Section 5 that defines the role of judicial authority in respect of arbitration matters. This
provision is adopted from Article 5 of the UNICITRAL Model law87 which is in turn derived
from the suggestions made by its working group. The scope of interference is restricted to
several grounds viz inter alia- Section 34 which specifies the grounds for challenge to the
validity of the award made in an arbitration including international commercial arbitration where
place of arbitration is situated in India. Under Section 34 the onus mirroring the NYC award is

84
Saha and Co. v/s Ishar Singh, AIR 1956 Cal 321 at 341
85
(1994) 6 SCC 485
86
(2003) 7 SCC 396
87
United Nations Commission on International Trade Law Model Law on International Commercial Arbitration,
General Assembly Resolution 40/72, adopted on 21st June 1985 (Model Law).
on the party challenging the award to prove that (i) a party was under some incapacity or (ii) the
arbitration agreement is not valid under the law applicable to it or (iii) the party seeking to set
aside the award was not given proper notice of the appointment of the arbitrator or of the arbitral
proceedings or was otherwise unable to present its case or (iv) awards deals with a dispute not
contemplated by or not falling within the terms of submission to arbitration or contains decisions
on matters beyond the scope of such submission or (v) the composition of the arbitral tribunal or
the arbitral procedure was not in accordance with the agreement of the parties. Unless the
agreement was in conflict with any provision of Part I of the Act from which the parties cannot
derogate. In addition the award can also be set aside if the court finds whether on application by
a party or suo moto, that (a) the subject matter of dispute is not capable of settlement by
arbitration under law for the time being in force or (b) the award is in conflict with the public
policy of India.

Various landmark cases on this particular subject are the Renusagar case88, Saw Pipes Case and
the recent Venture Global case. These cases have been dealt with in greater detail below but the
judgments just go to show that the main rationale behind the Act of controlling the supervisory
role of the courts on arbitral awards is marred.

The Saw Pipes case has proceeded to include patent illegality as a ground for setting aside an
arbitral award thereby widening the concept of public policy which in turn has opened the
floodgates of litigation. Read literally the judgment sets the clock back to the old position where
an award could be challenged on merits and indeed renders the court (testing enforceability of an
award) as a court of appeal. In the Venture Global case the Supreme Court held that before a
foreign award is enforced, the tests laid down in Section 34 of the Act have to be passed
including the wider concept of public policy created after the Saw Pipes Case. It was overlooked
by the Hon’ble Court that on prior occasions the court itself had held that Part I of the Act does
not apply to foreign awards. In the case, Jindal Drugs Limited Vs Noy Vallesina Engineering
Spa,8990 it was held that an application can be made u/s 34 for setting aside only domestic awards
in accordance with provisions of Part I.
88
The Renusagar case dealt with an international arbitration whereas the Saw Pipes case dealt with a domestic
arbitration. While both judgments examined ‘public policy’ the Saw Pipes case interpreted a contravention of it to
also include ‘patent illegality’.
89
2002(3)RAJ46
90
Mohta VA, The Arbitration and Conciliation Act, 1996(1st edn All India Reporter Pvt Ltd. 2001
 CONCEPT OF PUBLIC POLICY

The concept of public policy assumes importance with respect to arbitration as the courts now
possess the power to set aside any arbitral award if it is contravention of the public policy of
India.

The concept of public policy began when the Common Law Courts in England refused to
enforce contracts which were prima facie illegal. In India the three-judge bench made some
pertinent observations in the Renusagar case. In Renusagar Power Co. Ltd. v/s General
Electric Co.91 the Supreme Court held that in order to attract the bar of public policy the
enforcement of the award must invoke something more than the violation of the law of India.
The Court 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.

However, in recent times, the Supreme Court is more inclined towards the broader view.

New ground for challenge to award through judge made law

To the above mentioned legislatively stipulated grounds, came to be added a new ‘judge made’
ground. This came about in the Supreme Court decision of Oil and Natural Gas Corporation
Ltd. v/s Saw Pipes.92 The issue here was whether an award could be set aside on the ground that
the arbitral tribunal had incorrectly applied the law of liquidated damages to the case. The
question turned around the scope of Section 34 of the Act (which on a plain reading does not
permit a challenge on merits).

The Supreme Court in Saw Pipes case held, that an award can also be challenged on the ground
that it contravenes ‘the provisions of the Act or any other substantive law governing the parties
or is against the terms of the contract.’ Further, the judgment expanded the concept of public
policy to add that the award would be contrary to public policy if it is ‘patently illegal.’ The

91
1994 Supp. (1) SCC 644
92
AIR 2003SC 2629
Supreme Court in Saw Pipes Case confined the expansion of public policy to domestic awards
alone.

Some judicial decisions have tried to reign in the effect of Saw Pipes case. One instance of this
is the Supreme Court decision in the case of Mc Dermott International Inc. v/s Burn Standard
Inc. Co. Ltd.93 where the Court somewhat read down Saw Pipes. It held:

‘The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral
award only to ensure fairness. Intervention of the court is envisaged in few circumstances only,
like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot
correct the errors of arbitrators. It can only quash the award leaving the parties free to begin the
arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory
role of the court at minimum level and this can be justified as parties to the agreement make a
conscious decision to exclude the court’s jurisdiction by opting for arbitration as they prefer the
expediency and finality offered by it.’

Commenting on Saw Pipes the Court held:

‘We are not unmindful that the decision of this Court in ONGC had invited considerable adverse
comments but the correctness or otherwise of the said decision is not in question before us. It is
only for a larger Bench to consider the correctness or otherwise of the said decision. The said
decision is binding on us. The said decision has been followed in a large number of cases.’

A few High Court decisions have also sought to narrowly read Saw Pipes on the ground that
literary construed the judgment would expand judicial review beyond all limitations contained
not only under the Arbitration Act but even under the old regime.

However, the Legislature has introduced in the Parliament, the Arbitration and Conciliation
(Amendment) Bill, 200394 in order to clarify that public policy does not have the extended
meaning as given by the Supreme Court in Saw Pipes case. To remove doubts, the Bill provides
an Explanation to the words contrary to ‘public policy’ in sections 34 to mean contrary to (i)

93
(2006) 11 SCC 181 at 208
94
The draft Arbitration (Amendment) Bill, 2003(Bill no.LXXV of 2003), available at
http://www.rajyasabha.nic.in/bills- 1s-rs/2003/LXXV_2003.pdf
fundamental policy of India; or (ii) interests of India; or (iii) justice or morality, thus retaining
the meaning given by the Supreme Court in Renusagar Case. The limitations of a statute
become perceptible only over time. The Parliament intended to adopt the provisions of the
Model Law. However the various grounds are not comprehensive. Many lament that the law
applicable in England empowers the court to correct an error of law. However this needs to be
considered in light of the fact that the English Act continues with the system introduced in 1979
having three novel features aimed solely at curbing challenges to arbitral awards. With fewer
appeals being filed and far fewer successful appeals the system has served its purpose fairly well.
The Parliament is also now trying to provide an additional ground of challenge. Clause 27 of the
Amendment Bill seeks to insert a new section 34A to provide that where the award is not an
international award in India, the parties can challenge the award on the additional ground that
there is an error which is apparent on the face of the award giving rise to a substantial question of
law. It would be of immense value to point out the condition of ‘Manifest disregard of the law.’
This is a ground for vacation of an award introduced in the American system by a dictum in
Wilko95 ‘The decisions of US Courts in domestic law are absolutely on the same lines as the Law
Commission’s96 proposals for Section 34A for scrutiny on the ground that the domestic award
between Indian parties on the face of it suffers from an error which can be treated as a
‘substantial error of law.’ The Saw Pipes case is not entirely a dark blob on the statute as a
limited review on error apparent on or manifest on the face of the award is permitted both in
USA and UK so far as purely domestic awards are concerned.

It is submitted that the above decision needs reconsideration. In the absence of watertight
definition of patent illegality and drawing from the broad interpretation of public policy by virtue
of the saw pipes case what would ensue is that awards suffering from minor legal flaws would be
open to challenge and scrutiny and a possible overruling by the courts. Also one must bear in
mind that numerous arbitrations are conducted by arbitrators who are experts in commercial and
technical aspects but may not necessarily possess the legal expertise. One can now notice the
fundamental shift in the attitude of the courts towards striking down the arbitral award. In
essence the saw pipes case has struck at the very roots of the 1996 Act as most arbitrations will

95
Wilko v/s Swan 396 US at 436-37
96
The Commission has pointed out that awards for millions of rupees are being passed which are contrary to law
particularly where the State or a public sector undertaking is the respondent
now be subject to a second bout of legal arguments and the efficacy of the private jurisdictional
forum will be lost since the courts have now opened up a circuitous route, via public policy, to
appeal against the arbitral award. To decipher the saw pipes case in its entirety it must be
understood that arbitrations belong to the realm of the private domain, i.e. exclusively between
the parties to the arbitration and no one else. Bearing in mind it is imperative that the judiciary
maintains a non-interventionist stance towards this entire process. As Lord Mustill observed,
‘The possibility of a mistake for which there is no legal redress is a price which commercial men
have down the years been prepared to pay in the interest of what they regard as more flexible and
practical method of resolving their disputes a method which also has the particular virtue of
finality.’97 The parties opting for arbitration must be deemed to have accepted the inherent risk of
a decision that may not be questionable on the same grounds as the decision of an inferior court.
In arbitration the parties constitute the arbitrator as the sole and final judge of dispute, they bind
themselves to accept the award as final and conclusive, having regard to the object of the
arbitration Act and its scheme an award is ordinarily not liable to be set aside on the ground that
either on facts or in law it is erroneous. Why then should they be allowed recourse and reprieve
through the indirect route of public policy under the aegis of the court? The basic tenet of
arbitration is that the court’s role is essentially limited to ensuring that the award draws its
conclusion from the essential contractual terms. This being the case an award cannot be
overturned simply because the court itself may have arrived at a different conclusion based on
the same facts. In conclusion arbitration is a viable alternate forum devised by commercial men
the essence of arbitration is not to clothe the proceedings with legalese or strictly follow legal
norms and concepts, but to arrive at a commercially viable settlement via the arbitral award.

From this perspective it can safely be said that the Saw Pipes case has in one sweeping blow
upset the proverbial apple cart ‘finality’ being the most attractive and unique feature of
arbitration internationally has fallen by that wayside. Arbitration as it now stands in India is just
another step in the appeal process that most can do well without. The saw pipes case has opened
the Pandora’s Box insofar as the recourse to a court of law through challenges under Section 34
of the 1996 Act is concerned. In fact so lethal is its venom that it has already claimed two victims
in the form of two Delhi high court judgments- DSA Engineers v M/s Housing and Urban

97
Sir Michael Mustill and Steven C Boyd, Commercial Arbitration (2nd edn Butterworths London 1989) n.68, 229
Development98 and Shyam Telecom Ltd v/s ARM Ltd.99 The balance which had been achieved
by the three judge bench in the Renusagar case has been completely eroded by the two judge
bench of the Saw Pipes case. Internationally, the view is in favour of finality, and against
judicial review, except in very limited circumstances. This view is reflected in the Model Law,
which has set the tone in its Article 5, which provides that in matters governed by this law, no
court shall intervene except where so provided in this law. In other words, it tilts the balance
between party autonomy and judicial intervention in favour of finality of arbitral awards and
thus, against judicial intervention except on very restrictive grounds.

98
Unreported Delhi High court (21 April 2004)
99
Unreported Delhi High court (17 September 2004)
 DOMESTIC AWARD AND FOREIGN AWARD-END OF DISTINCTION

Supreme Court of India makes it easier to Set Aside Foreign Arbitral Awards100

The fundamental distinction between a foreign and a domestic award which has been reiterated
innumerable times in past judgments viz inter alia the Jindal case has been altered by the
Supreme Court in the recent case of Venture Global Engineering v/s Satyam Computer
Services Ltd.101 (Venture Global). Here the Supreme Court was concerned with a situation where
a foreign award rendered in London under the Rules of the LCIA was sought to be enforced by
the successful party (an Indian company) in the District Court, Michigan, USA. The sole
arbitrator appointed by the LCIA passed an award directing the Venture Global Engineering
(VGE) to transfer its shares to Satyam. The Satyam sought to enforce this award in the USA.
VGE filed a civil suit in an Indian District Court seeking to set aside the award. The District
Court, followed by the High Court, in appeal, dismissed the suit holding that there was no such
procedure envisaged under Indian law. However, the Supreme Court in appeal, following its
earlier decision in the case of Bhatia International v/s Bulk Trading102 held that even though
there was no provision in Part II of the Act providing for challenge to a foreign award, a petition
to set aside the same would lie under Section 34 Part I of the Act (i.e. it applied the domestic
award provisions to foreign awards). The Court held that the properties in question (shares in an
Indian company) are situated in India and necessarily Indian law would need to be followed to
execute the award. In such a situation the award must be validated on the touchstone of public
policy of India and the Indian public policy cannot be given a go by through the device of the
award being enforced on foreign shores. Going further the Court held that a challenge to a
foreign award in India would have to meet the expanded scope of public policy as laid down in
Saw Pipes (i.e. meet a challenge on merits contending that the award is ‘patently illegal’). The
Venture Global case is far reaching for it creates a new procedure and a new ground for
challenge to a foreign award (not envisaged under the Act). The new ground is that not only must
the award pass the NYC grounds incorporated in Section 48, it must pass the expanded ‘public
policy’ ground created under Section 34 of the Act. The statutorily envisaged grounds for

100
By Alden L. Atkins, Texas Transnational Law Quarterly – March 2008
101
Judgment dated 10th January 2008, in C.A. No. 309 of 2008
102
2002( 4) SCC 105
challenge to the award would also be rendered superfluous as notwithstanding the success of the
applicant on the NYC grounds, the award would still have to meet the expanded ‘public policy’
ground (and virtually have to meet a challenge to the award on merits). The Supreme Court in
Venture Global did not notice this self-created limitation in Saw Pipes nor did it notice the
narrower interpretation of public policy in Renusagar and therefore application of the expanded
interpretation of public policy to foreign awards is clearly per incuriam103.

Be that as it may, till the decision is clarified or modified, it has clearly muddied the waters and
the enforcement mechanism of foreign awards has become clumsy, uncertain and inefficient.

Importantly, however, the Supreme Court further held in its Venture Global decision that Part I
of the Arbitration Act, in its entirety or partially, may be either expressly or impliedly excluded
by contract parties in international commercial arbitration so that Part I, or that portion excluded,
may not be a basis for challenging an arbitration award arising from a dispute involving that
contract.

The Decision’s Relevance for Companies with Business Interests in India

The Indian Supreme Court’s Venture Global decision paves the way to challenge foreign
arbitration awards in an Indian court based on broad public policy grounds pursuant to Part I of
the Arbitration Act. As a result of the Venture Global decision, new risks exist with respect to
the impact of Part I of India’s Arbitration Act on contract parties’ rights and expectations in
agreements involving India and that contain arbitration clauses.

Owing to globalization and the need to evolve uniform laws on a particular subject it would be
relevant to point out the view of other countries on judicial review of arbitral awards. Although
international provisions are unenforceable it is of enormous significance to note the side in which
the balance is tilting.

103
Literally translated as "through lack of care", per incuriam refers to a judgment of a court which has been
decided without reference to a statutory provision or earlier judgment which would have been relevant.
 LIMITED JUDICIAL REVIEW OF ARBITRAL AWARDS - GLOBALLY

Leading arbitration jurisdictions tend to limit judicial Review of arbitral awards

The international trend is toward limited judicial review. International model arbitration
legislation and many of the key centers for international arbitration have, in the last two decades,
increasingly moved toward regimes providing for reduced judicial review in international
arbitrations.

UNITED STATES OF AMERICA - Federal Arbitration Act – contractual expansion of grounds

For vacatur?

Judicial review under the FAA is provided under section 10(a) of the FAA wherein jurisdiction
to courts to review an arbitration award is vested only where the process has been ‘tainted in
certain specific ways.’ This provision is the source of authority for most judicial review of
arbitration awards. It provides, in relevant part, that a reviewing court may vacate an award only:

(1) Where the award was procured by corruption, fraud, or undue means.
(2) Where there was evident partiality or corruption in the arbitrators, or either of them.
(3) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon
sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy;
or of any other misbehavior by which the rights of any party have been prejudiced.
(4) Where the arbitrators exceeded their powers, or so imperfectly executed.

There has been uproar of cases wherein parties to a contract expand or narrow down the grounds
under which an arbitral award can be reviewed by the judiciary. In the subsequent paragraphs I
have cited three very important cases wherein it was held that agreements which sought to
expand or limit the scope of judicial review are unenforceable.

On 24 March, 2008 the U.S. Supreme Court announced its decision in the closely watched case
of Hall Street Associates, L.L.C. v. Mattel, Inc. which arose out of a lease dispute between
petitioner, Hall Street Associates, L.L.C., and its tenant, Mattel, Inc. holding that parties seeking
to expeditiously vacate or modify an arbitral award in court under the Federal Arbitration Act
(‘FAA’) may not contractually supplement the grounds for vacatur or modification that are
enumerated in the FAA. As a result, arbitration agreements that provide for post-award judicial
review on grounds not enumerated in the FAA may be unenforceable, contrary to the parties’
contractual expectations. The decision rests on the Supreme Court’s conclusion that the relevant
sections in the FAA provide an exclusive list of grounds on which arbitral awards may be
vacated or modified.

Review clauses tend to invoke the principle that private agreements to arbitrate should be
enforced according to their terms. This principle provides a seemingly persuasive argument in
favor of permitting parties to define the scope of judicial review of arbitral awards: Since
arbitration is a product of parties’ agreement (and since there is a policy in favor of enforcing
agreements to arbitrate) it follows that courts should enforce the parties’ agreement regarding the
scope of judicial review.

In Kyocera Corp. v/s Prudential-Bache Trade Services, Inc.,104 the Ninth Circuit rejected this
argument, holding that it does not follow from the principle that private agreement to arbitrate
should be enforced according to their terms that private parties can alter the statutory standards
of review to be applied by federal courts. ‘Private parties’ freedom to fashion their own
arbitration process has no bearing whatsoever on their inability to amend the statutorily
prescribed standards governing federal court review,’ the court said.

In Hoeft, III v. MVL Group, Inc.,105 the Second Circuit considered an arbitration clause that
sought to eliminate entirely judicial review of an arbitration award, providing that the arbitrator’s
decision ‘shall be binding and conclusive upon each of the parties.’ The court held that such a
clause was unenforceable. In Hoeft, the parties attempting to rely on the narrow review clause
invoked the principle that agreements to arbitrate should be enforced according to their terms as
grounds to enforce that clause. Like the Ninth Circuit in LaPine II, the Second Circuit rejected
this argument, stating that ‘unlike arbitration, however, judicial review is not a creation of
contract, and the authority of a federal court to review an arbitration award (or any other matter)
does not derive from a private agreement.’ Whether they prefer expanded or narrow review,

104
341 F.3d987(9th cir.2003) (La Pine II)
105
No. 02-9155, 2003 WL 22048228 (2003)
private parties simply do not have the power to alter the prescribed standards by which federal
courts review arbitral awards.

FRANCE

France, where the International Court of Arbitration is headquartered, is by many measures the
leading international arbitration forum, in part, because it has established a policy of limited
judicial intrusion into arbitration proceedings and awards. French statutory and jurisprudential
authorities have indicated a clear intent to maintain a narrow scope of judicial review in order to
aid in the enforcement of arbitral awards, meaning that parties’ freedom of contract does not
include the right to create new grounds that are not provided for within the explicit text of the
applicable statutes. Statutory regulations pertaining to domestic arbitrations106 and international
arbitrations107 do not permit the parties to derogate from the enumerated grounds or expand the
judicial review of an arbitral award to include errors of law. In fact, both statutes are drafted in a
manner to render the enumerated list of appealable grounds exhaustive.

SWITZERLAND

Switzerland has also narrowed the scope of judicial review under its arbitration laws. Article 190
of the new Swiss Federal Code on Private International Law (the CPIL) enacted in 1987 adopted
fewer grounds for setting aside an award than did the previous law, and made clear that this list
was exhaustive.

UNITED KINGDOM

The only major ‘arbitration-friendly’ jurisdiction in which there is limited judicial review is the
United Kingdom, which, under the Arbitration Act 1996, provides for judicial review of
questions of law when the contract is governed by English law. This limited form of review
actually marked a historic shift away from much more sweeping judicial intervention. Until
1996, the right of appeal on substantive points of law had been essentially automatic. While the
default rules still provide for judicial review of errors of law, parties are permitted to forego such
review through agreement in advance. Furthermore, even when such an agreement is not
106
Articles 1442-1491 of the New Code of Civil Procedure
107
Articles 1492-1507 of the New Code of Civil Procedure
reached, judicial review of awards is only permitted through the permission of both parties or
leave of the court, which is only given under narrowly defined circumstances.

CHINA

In China, disputes arising under an arbitration agreement will only be dealt with through
arbitration. In accordance with Article 257 of the Civil Procedure Law and Article 5 of the
Arbitration Law, parties who agree to bring their disputes to arbitration cannot file a lawsuit.

An award made by an arbitration tribunal has the same effect as that of a decision made by a
court. Chinese law strictly limits access to judicial appeals in cases where the disputing parties
have agreed to arbitration. The award given is final and binding upon both parties, and neither
party can appeal against the decision of the arbitration commission. Only under exceptional
circumstances will judicial review of a tribunal’s decision be granted. The party seeking judicial
review must show to the Court of the place where the arbitration commission is located that the
arbitration commission wrongly granted an award. The position in China is that the court’s only
role in regards to arbitration commissions is one of support and therefore they will be very
reluctant to interfere with a decision of a commission.

It can be concluded, by quoting lines from the La Pine case ‘Broad judicial review of arbitration
decisions could well jeopardize the very benefits of arbitration, rendering informal arbitration
merely a prelude to a more cumbersome and time consuming review process.’
 CONCLUSION & SUGGESTIONS

Arbitration is considered the most convenient means of settlement of disputes these days. Almost
all the contracts of the period contain the clause to resolve the dispute by arbitration. There are
many advantages as is discussed in the project paper, but at the same time there remain many
incidental problems, which come with it.

There are many loopholes in the process of conduct of international arbitration and enforcement
of the awards. Foreign awards always pose problems when it comes to enforcement. There exists
many national legal systems, which do not easily accommodate the foreign awards.

Expanded review of arbitral awards by the judicial courts runs against the current trend in
international business. Judges today while deciding a particular issue should keep in mind the
international trends, as an increased scrutiny of award will make India a less attractive forum for
arbitration. It should be realized that arbitration parties do not want arbitrations to mirror the
long-drawn and expensive process of litigation. The provision of the Act has to be interpreted in
such a manner so as to further the goals and values of our society. It implies that the parties have
agreed to accept the award and abide by the same and fulfill their responsibilities for its
successful conclusion and implementation. The parties, therefore, should be prepared to abide by
the decision of the arbitration, so long as correct procedures are observed in conducting the
arbitration. If a court is allowed to review this decision on law or on merits, the speed and, above
all, the finality of the arbitral process are lost. Arbitration is in such a case reduced to being
merely the first stage in a process of successive appeals, which ultimately leads to the highest
appellate court. The enlargement of the concept of public policy on the grounds of patent
illegality refuses to take into account the fact that such a measure would be far detrimental to
arbitrations held on the national as well as international level.

Instead of setting aside the awards that were meant to be conclusive, judicial and legislative
efforts should be directed towards eradicating flaws in the current legislation, rather than
relegating parties to a long period of litigation that was intended to be avoided through the
inception of the 1996 Act.
There is a great need for a change of attitude. The judiciary as well as the legal profession have
to appreciate the reality that, in the era of globalization, dispute settlement by alternative
methods is not only a domestic matter but also an increasingly growing international
phenomenon in the context of cross-border transactions. They must be prepared to absorb
international values, norms and principles while performing their professional functions in the
field of international dispute settlement, otherwise their professionalism will prove moribund and
will be useless to the international business community.
BIBLIGRAPHY