Unit-4 Foreign Awards

Introduction
In today’s global economy where business transactions transcend national borders, there
certainly is a need to embrace robust strategies for addressing cross-border disputes. As
connections with other countries grow rapidly through the exchange of values, trends, art,
culture, and more, the legal landscape has been changing significantly. In light of this, it
becomes important to understand the enforcement of Foreign Arbitral Awards, which plays
a significant role for those dealing with the matters of Arbitration and seeking damage
claims, while also ensuring compliance with Human rights laws across Nations.
Arbitration serves as an alternate dispute resolution mechanism for two parties in a
contractual relationship who want to solve disputes without going to court due to cost and
time factors. In such cases, they can add an arbitration clause in the contract, which proves
to be very helpful in times of dispute.
Arbitration, in India, is governed by the Arbitration and Conciliation Act, 1996 where Section
2(1)(f) defines international commercial arbitration. In other words, it can be understood as
an arbitration between two parties, where at least one of the parties is a foreign national,
company, or government entity, thereby qualifying as international commercial arbitration.
Arbitration involves the concept of “seat”, which determines the jurisdiction whose laws
apply to the arbitration proceedings. For example, if arbitration occurs between a foreign
company and an Indian company with that in India, then it constitutes international
commercial arbitration. Conversely, if the seat is outside India, i.e., governed by foreign laws
of arbitration, then it will be a foreign arbitration.

What are foreign arbitral awards

Foreign arbitral awards, being closely associated with arbitration, can be defined as awards
issued in foreign jurisdictions. Typically, these awards stem from the proceedings held in
foreign arbitral tribunals and need to be recognized as “foreign signs”. They are governed by
various international treaties, conventions, and respective national laws to ensure
uniformity and predictability in their recognition and enforcement on a global scale.
To maintain international standards in arbitration law and enforce foreign arbitral awards,
domestic arbitration and international commercial arbitration laws have been introduced,
modified, and amended as needed. It ensures that arbitration laws remain effective and
efficient in meeting present requirements.
Foreign arbitral awards specifically refer to those arbitral awards that are issued in a country
other than where the enforcement takes place. These awards are internationally
recognizable and are subject to specific legal structures and frameworks for enforcement.
They fall under the purview of various laws, specific legislations, and international
conventions to facilitate their recognition and application across borders. With regard to
India, the Arbitration and Conciliation Act, 1996 defines “foreign award” under Section 44
ad 53 of Arbitration and Conciliation Act.
The term “foreign arbitral awards” specifically refers to the award issued through foreign
arbitration, which is distinct from domestic arbitration. In the case of Serajuddin and
Co. v. Michael Golodetz and Others, (1959) the Calcutta High Court elucidated necessary
restrictions and conditions aligning with the term “foreign arbitration”. The court laid down
certain essentials for what constitutes a foreign arbitration. According to this decision,
arbitration will be considered to be foreign arbitration, if:
1. a foreign party is involved,
2. arbitration is held in a foreign land,
3. arbitration is conducted by foreign arbitrators, and
4. foreign laws are applied to the arbitration.

Enforcement vs. recognition of foreign arbitral awards

While we are on foreign arbitral awards, it also becomes necessary to understand the
distinction between the terms “enforcement” and “recognition” in the context of
foreign arbitral awards. This distinction is crucial because it helps in the clarification of
legal processes, risk assessment, and decision-making, especially for parties involved
in international arbitration and cross-border dispute resolution, and legal practitioners
and arbitrators. By understanding the difference between these two terms and their
practical implications, the parties can streamline and expedite the dispute resolution
process.

The term “recognition” is defensive and secures the arbitral awards between the
same parties, of the same/similar nature, and under the same convention. In other
words, the contesting party may seek the recognition of the arbitral award to set off
any other claim of arbitration involving those parties with whom the disputes have
already been settled or resolved.

“Enforcement”, on the other hand, is of an offensive structure and nature. Over here,
the party seeking the arbitral award not only inducts for the intention of recognition
of the award but also intends for its enforcement by the method of legal sanctions.

In the case of Brace Transport Corpn. of Monrovia v. Orient Middle East Lines
Ltd. (1993), the Supreme Court of India held that an award may be enforced without
getting recognition. However, once it is enforced, its recognition inherently follows.
Therefore, both “enforcement” and “recognition” are two sides of the same coin. They
are contemporaries and act in tandem with each other.

Enforcement of foreign arbitral awards in India

The enforcement of arbitral awards involves two primary aspects: domestic awards,
governed by Section 36 of Part I of the Arbitration and Conciliation Act, 1996, and foreign
arbitral awards, which are recognized and enforced through two avenues: the New York
Convention, outlined in Chapter I of Part II of the Arbitration and Conciliation Act, 1996, and
the Geneva Convention, specified in Chapter II of Part II of the Arbitration and Conciliation
Act, 1996.
When the arbitral award from one country is recognized and enforced in another, this
involvement is considered as the enforcement of foreign arbitral awards.
The origins of the present law can be traced back to the provisions of the Arbitration
(Protocol and Convention) Act, 1937, and the Foreign Awards (Recognition and
Enforcement) Act, 1961. Both are repealed by the Arbitration and Conciliation Act, 1996.
These have been incorporated or referenced in Part II of the 1996 Act. Over time, there
have been many amendments and deletions to align with international protocols such as
the Geneva Protocol of the Arbitration Clauses, 1923 and the United Nations Convention on
the Recognition and Enforcement of Foreign Arbitral Awards, 1958.
The New York Convention
The New York convention also known as the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards was first adopted by the United Nations diplomatic
conference on 10 June 1958 and was enforced on 7 June 1959. It is often considered as one
of the most important treaties in the field of international trade law and has a great
significance. It is often described as a foundation stone in the field of international
arbitration. It requires courts of the contracting states to give effect to an agreement to
arbitrate when seized of an action in a matter covered by an arbitration agreement and also
to recognize and enforce awards made in other states, subject to specific limited exceptions.
At present, the convention is signed by 156 state parties.
It was adopted mainly for promoting healthy business relations between the countries and
to promote harmony and coordination among the states. Further it reduces the burden of
the states to decide which laws to be enforced or the procedures of which countries to be
followed during the process of the arbitration. Further it also establishes a minimum level of
control which the contracting states can exert over arbitral awards and arbitral agreements.
Definition
Section 44 defines a “foreign award” for the purposes of this Chapter. A foreign award refers
to an arbitral award arising out of disputes between parties from a legal relationship,
whether contractual or not, which is considered commercial under Indian law, and which is
made on or after 11th October 1960.
Such an award must be made pursuant to a written arbitration agreement to which the
Convention provided in the First Schedule applies. Additionally, the award must be made in a
territory that the Central Government has officially notified in the Official Gazette as a
reciprocating territory, meaning that it recognizes similar provisions for enforcement under
the Convention.
Enforcement
requirements of evidence for enforcement of a foreign award
Section 47 lays down the requirements of evidence for enforcement of a foreign award. It
provides that the party applying for enforcement must, at the time of making the
application, produce before the court the original arbitral award or a duly authenticated
copy in accordance with the law of the country where it was made, the original arbitration
agreement or a duly certified copy of it, and any other evidence necessary to establish that
the award qualifies as a foreign award.
Where the arbitral award or the arbitration agreement is in a foreign language, the party
seeking enforcement must also submit an English translation. Such translation must be
certified as correct either by a diplomatic or consular agent of the country to which the
party belongs or in any other manner recognized as sufficient under Indian law.
The Explanation clarifies that, for the purpose of this section and the subsequent provisions
in the Chapter, the term “Court” refers to the High Court having original jurisdiction to
decide the subject matter of the arbitral award as if it were a civil suit, or in other cases, the
High Court that has jurisdiction to hear appeals from subordinate courts.
Conditions for enforcement of foreign awards
Section 48 lays down the conditions under which enforcement of a foreign award may be
refused. Enforcement can be denied at the request of the party against whom it is invoked if
that party proves certain grounds, such as:
• incapacity of the parties,
• invalidity of the arbitration agreement under the applicable law,
• lack of proper notice of the appointment of the arbitrator or arbitral proceedings, or
• inability to present the case.
• It may also be refused if the award deals with matters beyond the scope of
arbitration, although separable valid parts may still be enforced,
• or if the composition of the arbitral tribunal or procedure was not in accordance with
the agreement of the parties or the law of the place of arbitration.
• Further, enforcement may be refused if the award has not yet become binding or has
been set aside or suspended by a competent authority in the country where it was
made.
Enforcement may also be refused by the court if it finds that the subject matter of the
dispute is not capable of settlement by arbitration under Indian law, or if enforcement
would be contrary to the public policy of India.
An award is considered against public policy only if it is affected by fraud or corruption,
violates confidentiality provisions under sections 75 or 81, contravenes the fundamental
policy of Indian law, or conflicts with the most basic notions of morality or justice. It is
clarified that examining a violation of the fundamental policy does not permit a review of
the merits of the dispute.
Additionally, if an application for setting aside or suspension of the award is pending before
a competent authority, the court may adjourn the enforcement proceedings and may also
require the opposing party to provide suitable security upon request of the party seeking
enforcement.
49. Enforcement of foreign awards.
Where the Court is satisfied that the foreign award is enforceable under this Chapter, the
award shall be deemed to be a decree of that Court.
Appealable orders
Section 50 provides for appealable orders in relation to foreign awards. Notwithstanding
anything contained in any other law, an appeal shall lie from an order refusing to refer the
parties to arbitration under section 45 or refusing to enforce a foreign award under section
48, and such appeal shall be made to the court authorized to hear appeals from such
orders.
However, no second appeal is permitted from an order passed in appeal under this section,
though the right to appeal to the Supreme Court remains unaffected.
Binding Nature
Section 46 provides that a foreign award, once it becomes enforceable under this Chapter, is
treated as binding on the parties between whom it was made. Such an award can be relied
upon by those parties in legal proceedings in India, whether as a defence, by way of set-off,
or in any other manner.
It further clarifies that references to the enforcement of a foreign award under this Chapter
also include relying on the award in legal proceedings, not just its formal execution.
The Geneva Convention
The concept of Geneva Convention arbitration refers to two early international legal
instruments developed under the League of Nations to regulate arbitration between parties
from different countries. These were the Geneva Protocol on Arbitration Clauses and the
Geneva Convention on the Execution of Foreign Arbitral Awards. Together, they formed
the first structured framework for recognizing arbitration agreements and enforcing arbitral
awards internationally.
The 1923 Protocol primarily dealt with the validity of arbitration agreements. It required
courts of member states to respect agreements where parties had chosen arbitration
instead of litigation. In simple terms, if two parties had agreed to resolve disputes through
arbitration, courts were expected to refer the matter to arbitration rather than deciding it
themselves.
The 1927 Convention, on the other hand, focused on the enforcement of foreign arbitral
awards. It allowed an arbitral award made in one country to be enforced in another.
However, the process was quite strict and required several conditions to be fulfilled, making
enforcement complicated and less efficient in practice.
Overall, these Geneva instruments laid the foundation of modern international arbitration
law, but due to their rigid requirements, they were eventually replaced by the more
practical and widely accepted **New York Convention. Today, the New York Convention
governs the recognition and enforcement of foreign arbitral awards globally.
Enforcement
Section 53 defines the term “foreign award” for the purposes of this Chapter. It refers to an
arbitral award arising out of disputes relating to matters considered commercial under
Indian law, and made after 28th July 1924. Such an award must be made pursuant to an
arbitration agreement to which the Protocol in the Second Schedule applies.
Further, the award must be between persons where one party is subject to the jurisdiction
of a country that the Central Government has declared, by notification, as a party to the
Convention in the Third Schedule, and the other party is subject to the jurisdiction of
another such country. Additionally, the award must be made in a territory that has been
similarly notified by the Central Government as a reciprocating territory where the
Convention applies.
Lastly, for the purposes of this Chapter, an award will not be considered final if any
proceedings are pending that may affect its validity or finality.
evidentiary requirements for enforcement
Section 56 lays down the evidentiary requirements for enforcement of a foreign award
under this Chapter. It provides that the party seeking enforcement must, at the time of
application, produce before the Court the original arbitral award or a duly authenticated
copy in accordance with the law of the country where it was made, evidence to prove that
the award has become final, and any other evidence necessary to establish that the
conditions specified in section 57(1)(a) and (c) are satisfied.
If any of the required documents are in a foreign language, the party must also submit an
English translation certified as correct either by a diplomatic or consular agent of the
country to which the party belongs or in any other manner recognized as sufficient under
Indian law.
The Explanation clarifies that, for the purposes of this section and the subsequent
provisions, the term “Court” refers to the High Court having original jurisdiction to decide
the subject matter of the arbitral award as if it were a civil suit, or in other cases, the High
Court having jurisdiction to hear appeals from subordinate courts.
conditions for enforcement
Section 57 lays down the conditions for enforcement of foreign awards under this Chapter.
It provides that a foreign award will be enforceable only if:
• it is made pursuant to a valid arbitration agreement under the applicable law,
• the subject matter is capable of settlement by arbitration under Indian law, and
• the award is made by a properly constituted arbitral tribunal in accordance with the
agreement of the parties and the governing procedural law.
• It must also be final in the country where it was made, meaning it should not be open
to appeal or opposition, nor should any proceedings challenging its validity be
pending.
• Additionally, enforcement must not be contrary to the public policy or law of India.
An award is considered against public policy only if it is affected by fraud or corruption,
violates provisions like sections 75 or 81, contravenes the fundamental policy of Indian law,
or conflicts with basic notions of morality or justice, and such examination does not permit
a review on the merits of the dispute.
Even if these conditions are fulfilled, enforcement may still be refused if the Court finds that
the:
• award has been annulled in the country where it was made,
• or that the party against whom it is sought to be enforced was not given proper
notice of the arbitration proceedings or was under legal incapacity and not properly
represented.
• Enforcement may also be refused if the award deals with matters beyond the scope
of the arbitration agreement. However, if only part of the award exceeds such scope
or if all disputes were not covered, the Court may postpone enforcement or allow it
subject to conditions or guarantees.
Further, if the opposing party proves that under the law governing the arbitration procedure
there exist other valid grounds to challenge the award, the Court may either refuse
enforcement or adjourn the proceedings to allow time for the award to be set aside by a
competent authority.
58. Enforcement of foreign awards.
Where the Court is satisfied that the foreign award is enforceable under this Chapter, the
award shall be deemed to be a decree of the Court.
appealable orders
Section 59 provides for appealable orders under this Chapter. It states that an appeal shall
lie from an order refusing to refer the parties to arbitration under section 54 or refusing to
enforce a foreign award under section 57, and such appeal shall be made to the court
authorized by law to hear appeals from such orders.
However, no second appeal is allowed from an order passed in appeal under this section,
although the right to appeal to the Supreme Court remains unaffected.