Juridical seat of Arbitration attracts law of the location. In such cases Part I of the Arbitration Act would not have any application-Supreme Court

Juridical seat of Arbitration attracts law of the location. In such cases Part I of the Arbitration Act would not have any application-Supreme Court

Case Law Details:
Civil Appeals Nos. 5131-5133 of 2016
Eitzen Bulk A/S …. Appellants vs. Ashapura Minechem Ltd. & ANR. ..Respondents
Civil Appeal No. 5136 of 2016
Ashapura Minechem Ltd. …. APPELLANT (S) vs. Eitzen Bulk A/S ….. APPELLANT (S)
Date of Judgment: 13/05/2016
Coram: Justice S. A. Bobde

Question before the Court:
Whether Part I of the Arbitration Act is excluded from its operation in case of a Foreign Award where the Arbitration is not held in India and is governed by foreign law?

Important Judgments Cited:
Reliance Industries Limited and another v. Union of India 2014 (7) SCC 603

Brief Facts of the Case:
Eitzen Bulk A/S of Denmark (`Eitzen’) entered into the contract with Ashapura Minechem Limited of Mumbai (`Ashapura’) as charterers for shipment of bauxite from India to China. As per the terms of the Charter, parties agreed to the following Arbitration Clause:

“Clause No. 28 Any dispute arising under this C.O.A. is to be settled and referred to Arbitration in London. One Arbitrator to be employed by the Charterers and one by the Owners and in case they shall not agree then shall appoint an Umpire whose decision shall be final and binding, the Arbitrators and Umpire to be Commercial Shipping Men. English Law to apply. Notwithstanding anything to the contrary agreed in the C.O.A., all disputes where the amount involved is less then USD 50,000/- (fifty thousand) the Arbitration shall be conducted in accordance with the Small Claims Procedure of the L.M.A.A.” (emphasis supplied)

Later, disputes arose between the parties and the matter was referred to Arbitration held in London according to English Law. Ashapura was held liable and directed to pay damages to Etizen.

Before Arbitration had commenced, Ashapura had filed a suit and an application for injunction before the Civil Judge at Gujarat challenging that the Contract and the Arbitration Clause contained therein was illegal, null and void, ab-initio. However it was finally dismissed for want of jurisdiction and the appeal filed by Ashapura before Gujarat High Court was also dismissed as withdrawn.

Thereafter, Ashapura resorted to Section 34 of the Arbitration Act and filed objections in India in respect of the Award passed in London praying setting aside the Foreign Award made in London and grant of injunction restricting Eitzen Bulk from enforcing the Award in foreign jurisdictions outside India However, the application was dismissed for injunction seeking restraint on enforcement of the Award.

As the dispute progressed, the Gujarat High Court held that Ashapura’s objections under Section 34 of the Arbitration Act are tenable before a Court in India.

The Supreme Court observed that Ashapura had a similar dispute with Armada (Singapore) Pvt. Ltd. where Bombay High Court had ordered execution of the Award.

In the present case, the appellant contended that Arbitration Clause 28 clearly stipulated that any dispute under the Contract “is to be settled and referred to Arbitration in London” and that English Law shall apply.  This expressly or impliedly exclude the provisions of Part I to the Arbitration.

Important Excerpts from Supreme Court Judgment:

There is thus an express exclusion of the applicability of Part I to the instant Arbitration by Clause 28. In fact, Clause 28 deals with not only the seat of Arbitration but also provides that there shall be two Arbitrators, one appointed by the charterers and one by the owners and they shall appoint an Umpire, in case there is no agreement. In this context, it may be noted that the Indian Arbitration and Conciliation Act, 1996 makes no provision for Umpires and the intention is clearly to refer to an Umpire contemplated by Section 21 of the English Arbitration Act, 1996. It is thus clear that the intention is that the Arbitration should be conducted under the English law, i.e. the English Arbitration Act, 1996. It may also be noted that Sections 67, 68 and 69 of the English Arbitration Act provide for challenge to an Award on grounds stated therein. The intention is thus clearly to exclude the applicability of Part I to the instant Arbitration proceedings.

In fact, such a situation has been held to exclude the applicability of Part I in a case where a similar clause governed the Arbitration. In Reliance Industries Limited and another v. Union of India.

clause 28 in the present case must be intended to have a similar effect that is to exclude the applicability of Part I of the Indian Arbitration and Conciliation Act since the parties have chosen London as the seat of Arbitration and further provided that the Arbitration shall be governed by English Law. In this case the losing side has relentlessly resorted to apparent remedies for stalling the execution of the Award and in fact even attempted to prevent Arbitration. This case has become typical of cases where even the fruits of Arbitration are interminably delayed. Even though it has been settled law for quite some time that Part I is excluded where parties choose that the seat of Arbitration is outside India and the Arbitration should be governed by the law of a foreign country. 

We are thus of the view that by Clause 28, the parties chose to exclude the application of Part I to the Arbitration proceedings between them by choosing London as the venue for Arbitration and by making English law applicable to Arbitration, as observed earlier. It is too well settled by now that where the parties choose a juridical seat of Arbitration outside India and provide that the law which governs Arbitration will be a law other than Indian law, part I of the Act would not have any application and, therefore, the award debtor would not be entitled to challenge the award by raising objections under Section 34 before a Court in India. A Court in India could not have jurisdiction to entertain such objections under Section 34 in such a case.

Arbitration outside India under Foreign Law

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