Yes, two Indian parties can choose a foreign seat of arbitration for resolving their disputes. The seat of arbitration (also referred to as the venue or jurisdiction) plays a critical role in determining the legal framework that governs the arbitration process, including procedural laws, enforcement of awards, and the scope of judicial intervention. While the Arbitration and Conciliation Act, 1996 (Indian Arbitration Act) governs arbitrations in India, Indian parties are free to agree on a foreign seat, which brings the arbitration under the jurisdiction of the laws of the chosen country.
The Indian Arbitration Act provides that the parties have the freedom to choose the seat of arbitration. The seat determines the jurisdiction of the arbitration, the law that will apply to the proceedings (referred to as procedural law), and the role of the courts in relation to the arbitration. Even if both parties are Indian, they can mutually decide to hold arbitration in a foreign jurisdiction like London, Singapore, or New York.
For example, if two Indian parties agree to arbitrate under the rules of the London Court of International Arbitration (LCIA) in London, it is perfectly valid under Indian law.
The procedural law governing the arbitration is usually the law of the seat. Therefore, if the seat is in a foreign jurisdiction, the foreign law will apply to the arbitration procedure. For instance:
When two Indian parties agree on a foreign seat, the courts of that foreign jurisdiction will have primary jurisdiction over the arbitration. These courts would be responsible for:
Indian courts will generally only intervene in limited circumstances, such as when the enforcement of the arbitral award is sought in India.
If the seat of arbitration is outside India, the arbitration award will be subject to the New York Convention (if the seat is in a country that has ratified the Convention). This means the award can be recognized and enforced globally under the terms of the Convention.
However, if the seat is in India, the enforcement of the award will be governed by the Indian Arbitration Act, and the award can be enforced in Indian courts subject to the conditions under the Act.
For instance, if the seat is in Singapore, the arbitration award will be subject to enforcement under the New York Convention in India.
Even though the seat of arbitration is foreign, Indian courts may still play a role in granting interim relief under Section 9 of the Arbitration Act. However, the scope of intervention by Indian courts will be limited, and they will respect the foreign seat's jurisdiction and arbitration procedures.
In the case of Indian Oil Corporation Ltd. v. Amritsar Gas Service (1991), the Indian Supreme Court upheld the freedom of parties to choose a foreign seat of arbitration, emphasizing that Indian courts will have limited jurisdiction once the seat of arbitration is determined.
While Indian courts may generally not interfere with arbitrations having a foreign seat, they may refuse enforcement of an award if it is found to be contrary to Indian public policy. This is consistent with India’s commitments under the New York Convention and international arbitration standards.
Two Indian companies enter into a commercial agreement involving a significant international trade deal. They decide to resolve any disputes through arbitration in Singapore under the Singapore International Arbitration Centre (SIAC) rules.
In this case, the arbitration will be governed by Singapore law, and the arbitration will be considered international, even though the parties are both Indian. Indian courts would have limited jurisdiction and can only intervene in enforcing the award if necessary.
A contract dispute arises between an Indian software company and a U.S.-based company. They agree to arbitrate in London under LCIA rules.
The seat of arbitration is in London, so the arbitration will be governed by English law. If an award is rendered, it can be enforced under the New York Convention in both the U.K. and India, as both are signatories to the Convention.
Yes, two Indian parties can choose a foreign seat for arbitration. The seat of arbitration determines the jurisdiction and legal framework governing the proceedings. While Indian law (under the Arbitration and Conciliation Act, 1996) applies to arbitrations conducted in India, foreign seats bring the arbitration under the jurisdiction of the chosen foreign country’s laws. This freedom of choice promotes international dispute resolution and allows parties to resolve conflicts efficiently while respecting their mutual preferences regarding jurisdiction and procedural law.
Answer By Law4u Team
Discover clear and detailed answers to common questions about public international law. Learn about procedures and more in straightforward language.
