Enforcement And Recognition Of International Arbitral Awards In India: Issues And Challenges

Post published:July 18, 2021
Post category:Blog
Reading time:8 mins read

Arbitral Awards In India Issues And Challenges

Introduction

Arbitration has become one of the most popular Alternative Dispute Resolution processes on the global scene. Arbitration is becoming the favoured means of resolving business disputes for a growing number of companies. However, enforcing an Arbitral Award is fraught with difficulties. Despite the fact that the Indian Constitution encourages the use of arbitration to resolve disputes, enforcing a foreign arbitration award in India remains a substantial difficulty.

Enforcement Of Arbitral Award

The provisions of the Arbitration and Conciliation Act of 1996, as well as the Civil Procedure Code, regulate the procedure for the execution of arbitral awards (CPC). After receiving a favourable ruling, an award holder must wait three months before filing an application for the award’s enforcement. The award can be appealed by the opposite party during this three-month period under Section 34 of the Arbitration and Conciliation Act. The award can be applied for execution in the proper court once the three-month time has passed.

The provisions of Section 36 to 74 of the Arbitration and Conciliation Act, 1996, or Order XXI of the CPC can be used to execute a decree. The statute of limitations for enforcing such an award is twelve years.

Previously (i.e. prior to the 2015 modification to the Arbitration Act), raising an objection under Section 34 would automatically place a stay on the order being challenged. However, the 2015 change has necessitated the filing of a separate motion to stay the order. The objection under section 34 would not be sufficient to stay the injunction.

International Awards Under Arbitration And Conciliation Act, 1996

The Arbitration and Conciliation Act of 1996 distinguishes between awards made by arbitration tribunals situated in India and those made by arbitration tribunals seated overseas. The procedure for executing a domestic award differs from the procedure for executing a foreign award. Domestic awards are those that are made in accordance with the provisions of Sections 2 to 43. The parties concerned in these proceedings are Indian citizens who live in India’s national territory.

A Foreign Award is defined by Section 44 of the Arbitration and Conciliation Act, 1996 as an arbitral award on disagreements relating to matters considered commercial under Indian law. In order for an award to be classified as a “Foreign Award,” two conditions must be met. One, it must address the differences that arise from a legal connection that is business or is considered commercial under Indian law.

Second, the country issuing the award must be one that the Indian government has designated as a country to which the New York Convention applies. This convention has India as a signatory. Only awards conferred by these nations are recognized as foreign awards in India and are enforced. The second portion of the Arbitration Act governs the execution of these awards.

The execution of a foreign award in India follows a three-step procedure. First, the party in whose favour the award is made will file an application under Section 47 of the Arbitration and Conciliation Act, along with all supporting documentation. Second, the party against whom the award is made must raise a defence in accordance with section 48 of the act, together with all evidence. Finally, if the court is satisfied that the award is enforceable based on all of the facts presented by the parties, it will enforce it under section 49 of the act.

Challenges In Enforcing International Arbitral Awards

Obtaining a favourable award from an international tribunal is not always good news, since you must still get the award implemented in India. The majority of arbitral awards are deliberately followed. The issue arises when one of the parties contests the award, necessitating its enforcement. Several examples have arisen in which a party has received a favourable award but has been unable to get it enforced by a competent court in India. The reasons for these failed enforcements range from one party’s decision not to participate in the Arbitral proceedings to other scenarios in which the judgment has been challenged on the basis of costs awarded or the Arbitrator’s jurisdiction.

In arbitration, a local party will wield greater political power than a foreign party. They will try to use this ability to have the award revoked or, at the very least, have the amount reduced. This could lead to an International Arbitration Seat’s award being overturned. This is owing to a lack of authority to oversee the substantive and procedural assessment of these awards’ enforcement.

A Foreign Arbitral Award can be executed in any jurisdiction where the opposing party’s assets are located. It’s impossible to rule out the chance that judges in various jurisdictions will interpret the same judgment differently. Even though an award is given by an Arbitration in India, it may not be enforceable in another country’s jurisdiction.

Conclusion

There is still a lot of ambiguity about how to enforce a foreign award. To develop confidence among the parties that have chosen Arbitration as their preferred means of ADR, much-needed clarification is required. The only way to avoid the spread of this mistrust is for legislation to be passed that closes these loopholes. The modifications, in unison with the Supreme Court of India’s judgments, are a step in the right direction. It will assist in increasing the volume of arbitration in India.