Enforcement Of Arbitral Awards

Sometimes the disputes are not able to be resolved in the Traditional Courts due to their complexity or time-consuming process to resolve. In such cases, both parties are looking for a faster and better way for the settlement without the need for Traditional Courts.

This is where Arbitration comes as the most Effective Solution to resolve the issue outside of the courtroom. Arbitration is like a Trial Proceeding where both parties present their case and argue on the dispute, while the Arbitrator (like a Judge) sees the whole trial and passes a Judgment as a decision. This Judgment is also referred to as an Arbitral Award.

Arbitration is similar to the Judicial Process with all the hearings of both Parties, Judgment, and Proof but this is a Faster, Flexible, and Simple Procedure. It's especially preferred by those parties who have big disputes and are looking for a faster solution to resolve disputes than the Judicial process.

However, many people are not aware that an Arbitral Award has various laws and challenges, and knowing this is essential before proceeding with this option.

In this article, we will deep dive into the Arbitral Award, enforcement of an Arbitral Award, its conditions, and limitations that you need to know.

What Is An Arbitral Award?

An Arbitral Award is referred to as the final decision made by the Arbitrator (Judge) during the Arbitration process of resolving the dispute. It is exactly like a Court Procedure, but the result that a Judge announces in Arbitration is to resolve the dispute between both parties. So, if both parties agree, then they will follow the Arbitral Result and Resolve the Dispute.

However, if both parties believe that the Arbitrator (Judge) made a mistake or gave an Unfair Award, then they have different options as well, such as Canceling the Award based on a valid reason or asking a court to Review the Award.

Plus, if an Award is legal and fair, but one party refuses to comply with the award, then another party has the right to take action to enforce it.

Arbitral awards can be categorized as follows:

• Domestic Arbitral Award
• Foreign Arbitral Award

Let’s explore each one in detail!

Domestic Arbitral Award

The domestic arbitral award is covered in Part I of the Arbitration and Conciliation Act, 1996 in India. Domestic awards are different from foreign or international awards because a foreign award is considered a domestic award if it's made in the country where the arbitration takes place. So, if you have a domestic award but disagree with it, then you can challenge it in court under Section 34 of the Act. But the process doesn't apply to foreign awards similarly. However, there's an exception if a domestic award also includes an international arbitration award; when one party is from outside India, then the award is still treated as a domestic award during the enforcement and challenges.

Foreign Arbitral Award

A foreign arbitral award is a decision made by an arbitration proceeding outside India. This means this term becomes important when one party wants to enforce the award in a country other than where it was made. In India, the process for enforcing foreign arbitral awards was given by Section 48 of the Arbitration and Conciliation Act, which aligns with Article V of the New York Convention. This means that when one of the parties wants to enforce a foreign award in India, it can surely do so based on the reasons listed in Section 48. When the contract was governed by Indian law, then one of the parties couldn't challenge a foreign award on its merits in India. Otherwise, they need proof that applies to one of the reasons listed in Section 48. Overall, a foreign arbitral award can be enforced in India, but it is restricted by some specific legal restrictions.

Enforcement Of An Arbitral Award

An Arbitral Award is a decision which is made by the judge but outside the court. As per the Section 34 of the law, once a time to challenge the decisions is over then it must be treated like a court order and enforced by the court. Because for the award to be enforced, it must be final and valid for both parties.

So when the dispute is settled between the parties then the winning side can't ask for more and the losing party has an option to restart the case if they can get a better outcome but within the allowed time.

If no one challenges the reward within the allowed time, then the award becomes a court decision, which couldn't raise any dispute, and both parties need to agree.

Enforcement Of Domestic Award

In India, when an Arbitrator (Judge) makes a decision outside the court during the arbitration process, it is still counted as a court order, which is enforced under the Arbitration and Conciliation Act.

When the arbitral award is final then the winner of the award can go to a commercial court or high court to enforce it against the other party. It's a very essential step for the winning party to ensure that the losing party complies with the decision. But, if a losing party challenges the award within the timeframe then the court can temporarily pause the enforcement until the dispute is resolved. According to the 2015 Amendment Act, the losing party must submit a separate request to pause the enforcement.

It's important to understand that if the court finds the award valid during the enforcement then there's no option for the losing party to challenge it. It became the final award and must be honoured.

Enforcement Of Foreign Award

India is one of the prime members of two important international agreements that deal with foreign arbitral awards including the Geneva Convention (1927) and the New York Convention (1958). That's a key agreement that enforces foreign arbitral awards in India but must be followed with certain conditions.

To enforce an award in India, India must declare the signature required from one of the countries for conventions as a meeting country.

India has more than 48 countries recognized for this purpose and is treating them like global members, including the recently added Mauritius.

However, enforcing a foreign award in India has a two-step process:

1. Recognition: First, the court will check whether the award meets the legal requirements under Indian law. This step helps to ensure that the award is aligned with the rules.
2. Enforcement: When the award passes the check, and the court enforces it as a decision made by the Indian courts.

However, the process of enforcement can be delayed because of various technical issues including needing to file an original or certified copy of the award as per the agreement.

To make the foreign award qualify in India, there are two conditions to be met:

• The dispute must involve a legal relationship, which is considered a "commercial relationship" broadly.
• The award must come from a country that is recognized by the Indian Government as suitable for enforcing foreign awards.

Requirements For The Enforcement Of Foreign Awards

To enforce a foreign award in India, there are some requirements that need to provide the court, including:

• The original or certified copy of the foreign award must be by an arbitral tribunal.
• The original or certified copy of the agreement between the parties.
• Show Evidence to prove the existence of a foreign award and that it was properly issued.

Conditions For Enforcement Of Domestic And Foreign Arbitral Awards

Here are some of the following conditions for the enforcement of domestic and foreign arbitral awards in India:

• The parties don't agree on certain terms, or if the agreement isn't valid under the law, then the award can be challenged
• If the arbiter didn't have the authority to resolve disputes under Indian law
• When enforcing awards goes against Indian public policy
• If the award is based on an agreement that is not valid
• When the foreign award has never been binding or if it was suspended or set aside by the proper authority in the country where it was made
• If one party was not notified about the appointment of the arbitrator or the arbitration process

Types of Domestic And Foreign Arbitral Awards Which Are Enforceable

Here are some common types of domestic and foreign Arbitral Awards which are enforceable:

• Those awards which contain prohibiting the doing of acts
• Money awards that involve the payment of money
• Other types of awards that don't fit but are valid can be enforced
• Declaratory awards that declare the rights or obligations of the parties involved
• Decisions or awards which is made by the emergency arbitral authority and grant interim injunction

Limitation Period For Enforcement of Arbitral Awards

Domestic Award

When it comes to enforcing domestic arbitral awards in India, then, the law gives a maximum of twelve years. As per the Supreme Court, in the case of Umesh Goel v. Himachal Pradesh Cooperative Group Housing Society, the court declared that the Limitation Act of 1963 would apply to arbitration cases. That means domestic awards have a maximum twelve-year period.

Foreign Award

When it comes to enforcing foreign arbitral awards then, different high courts have different rules to follow:

The Bombay High Court: This high court says that a foreign award includes a two-step process i.e, first the award must be officially recognized by the court which takes up to three years. And once it's recognized then when it is enforced it then takes twelve years to complete the enforcement.

The Madras High Court: As per the Madras High Court, if a foreign award is treated like a court decree, then it can be easily enforced in India. However, if you were enforcing a regular court decree, then it would take twelve years.

It clearly shows that both The Bombay High Court and Madras High Court have different time limits and processes.

Conclusion

In the past, India lacked clear regulations for enforcing foreign arbitral awards, and it was challenging to integrate the awards into the Indian legal system. However, various changes have been made that have shifted towards creating a supportive environment for enforcing such awards. However, the current legal framework requires further refinement to address these issues. Enhancing the clarity and efficiency of the process will strengthen India's position. We hope this article helps you know everything about arbitral awards, the enforcement of such awards in India, and the limitations to face. As India has continuously improved its arbitration laws, these limitations and challenges will soon be resolved and aligned with the process.

FAQs

Q. Can There Be A Foreign-Seated International Commercial Arbitration Between Two Indian Entities?

A. Yes, two Indian companies have the option to choose their arbitration. To take place in a foreign country even if they are based in India. The Supreme Court confirmed this in the case of ASL Wind Solutions Private Limited v. GE Power Conversion India Private Limited 2021. When two companies do this then it can be enforced in India as per the Arbitration and Conciliation Act, 1996.

Q. Can Perversity In Interpretation Be A Grounds For Objecting To A Foreign Award?

A. No, there is no right to object to a foreign award just because one party believed there was a mistake or unfairness in interpreting the contract clause. This was cleared by the Supreme Court, which made this clear in the Vijay Karia v. Prysmian Cavi E Sistemi 2020 case.

Q. Can The Parties To An India-Seated International Commercial Arbitration Choose A Venue Outside India?

A. Yes, both parties in India seated international commercial arbitration can choose a venue outside India for their hearings. However, the venue is just considered as the location of the hearing. Which has nothing to do with the juridical seat. Which remains in India and follows the Indian court jurisdiction. It was confirmed by the Supreme Court in the Videocon Industries Ltd. v. Union of India 2011 case.

Q. If A Foreign Award Is Passed In A Country That Is A Contracting Party Not Just To The New York Convention But Also To The Geneva Convention, Then How Would Such An Award Be Enforced In India?

If a foreign award is issued in a country which is part of the both New York and Geneva Conventions. Then it will be enforced in India as per the New York Convention's rules and the Geneva Convention would not apply in this case. Because of the Section 52 of the 1996 Act and Article VII (2) of the New York Convention. It says that the New York Convention will take precedence over the Geneva Convention for enforcement purposes.