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What Happens When Foreign Arbitral Awards Do Not Comply With FEMA?
According to the Arbitration and Conciliation Act, 1996, the interference of Indian courts in foreign arbitral awards is meant to be at a minimum level to limit judicial interference in arbitration proceedings. Although that is the way expected behaviour, some cases call for interference by the Joshi judiciary, owing to the persisting ambiguity in the case at hand. The search was seen in the recent case of Vijay Karia v. Prysmian Cavi E Sistemi SRL & Ors.
Facts of The Case
The multifaceted dispute between Vijay Karia & Prysmian Cavi E Sistemi SRL & Ors. brought forward various questions of law before the Supreme Court. The most significant one is the enforceability of a foreign arbitral award, inconsistent with the Foreign Exchange Management Act, 1999 (FEMA).
The arbitral awards whose enforceability was in question were passed by a sole arbitrator as per the London Court of International Arbitration guidelines.
The nature of the dispute which resulted in the arbitration proceedings was mainly a commercial one, wherein allegations of a material breach of the agreement between the parties were placed upon the appellant. These awards were challenged at different stages of the arbitration proceedings back in London, which recently rejected by the LCIA Court. A petition under section 48 of the Arbitration and Conciliation Act, 1996, was filed before the Bombay High Court.
Judgement Delivered
The Supreme Court, in this case, made comments on the several factors which presented themselves as questions of law before the court itself. The following ones are part of the significant ones:
- First and foremost, the Court reiterated the according to Section 50 of the Act, a foreign award that had already been challenged at a previous stage should not easily invoke the interference of an Indian court due to the limitatConstitution's limitations owing in the path of the first point, the Court further stated that since the subject matter of the foreign awards were not fulfilling any of the grounds on which the court could interfere with their enforceability, the claims of the Appellant were rejected.
- About the violation of FEMA being done by the foreign award, the Apex Court rejected the argument, mainly because the Court found that the grounds of ‘violation of India' fundamental policy, which was being claimed by the Appellant, was not factual.
- In simple words, the Court held that if a foreign award is being passed following the rules of the seat of such foreign arbitration, the conformity of such an award with provisions of an enactment is not necessary, and its enforceability can only be sustained if there is an actual infringement of substantive and fundamental policies of India.
- Since the award was merely violating a provision of FEMA and there was no restriction on the interference of RBI (the relevant body of authority for the subject matter of dispute at hand), the Court rejected the challenge placed on the foreign arbitral award and sanctioned its enforceability.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts made to ensure the accuracy and correctness of the information published, White Code VIA Mediation and Arbitration Centre shall not be responsible for any errors caused due to human error or otherwise.
- Background Information
- Facts of the Case
- Judgement Delivered
