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SEAT AND VENUE OF ARBITRATION: THE MANKASTU - AIRVISUAL CASE
INTRODUCTION
The terms 'Seat' and 'Venue' are critical in any arbitration process since they establish where the arbitration will occur and the regulatory jurisdiction of courts, and the determining legislation (lex arbitri) that will govern it. The seat of an arbitration defines the procedural law and determines which courts will have supervisory jurisdiction. On the other hand, the venue merely states the geographical place where the arbitration takes place and does not cover the procedural law or jurisdictional aspect. The word ‘seat’ or ‘venue’ has not been defined in the Arbitration and Conciliation Act, 1996. ‘Place of Arbitration’ given in Sec. 20 of the act is used to denote both seat and venue interchangeably.
Over the years, not having any statutory regime, judicial pronouncements have confounded the true nature of the terms ‘seat’ and ‘venue’. The recent three-judge bench judgment shed some clarity onto this aspect with the help of Mankastu Impex Private Limited v. Airvisual Limited[1].
PERUSAL OF FACTS
‘Seat’ of an arbitration is the deciding clause of it. It governs the jurisdictional clause, applicable and procedural law for judicial review at the time of arbitration award. ‘Venue’ regulates the place of ‘Seat’. It determines the location of the arbitration proceedings.
MIPL (Mankastu Impex Private Ltd) and AVDL (Airvisual Limited) had entered into an MoU which stated that MIPL would be the exclusive distributor of AVL’s air quality monitor products for five years. AVL was eventually purchased by IQAir AG and revoked the legal obligations with MIPL. MIPL invoked the MoU clause stating its exclusive rights over the sale of AVL products for five years. This was rejected by IQAir, thus leading to this dispute.
Later, in Dec 2017, MIPL invoked the arbitration clause of the MoU. By bringing an application for interim relief under section 9 of the Act, the petitioner (MIPL) invoked the arbitration clause and submitted it to the jurisdiction of the Delhi High Court. The respondent claimed that the arbitration provision in the agreement specified Hong Kong. The petitioner submitted a section 11 application for the appointment of a solitary arbitrator, which brought the case to the Supreme Court.
ISSUE
- Whether Hong Kong or India would be the seat of arbitration as per clause 17 of the MoU?
JUDGMENT AND ANALYSIS
Previously, the Supreme Court in the Hardy Exploration and BGS SGS case had pronounced different rulings. In Hardy Exploration, the court stated that it should depend on the arbitration clause and related factors determining the ‘seat’ of arbitration. The court iterated that the venue is not the seat of arbitration unless it is mentioned in the agreement. It held that centre and venue could be used interchangeably. In the BGS SGS case, the court took a different stand holding that if ‘venue’ was mentioned in conjunction with ‘arbitration proceeding’, that should be understood as the ‘seat’ of arbitration. The court propounded that Hardy exploration cases were in contradiction with BALCO[2] case
The court in the Mankastu-Airvisual case agreed with the BALCO case and reiterated that the difference between ‘seat’ and ‘venue’ is critical and cannot be used interchangeably. The decision went even farther, holding that the parties' intent about the relevant law (seat) can be deduced from their actions and the agreement's other clauses. The court concluded that the reading of the agreement intends that ‘Hong Kong’ is not merely the venue of arbitration but also the ‘seat’. The court cited Indus Mobile Distribution (P) Ltd. v. Datawind Innovations (P) Ltd. The appropriate legislation in Hong Kong law and a section 11 application does not rest with the Supreme Court of India because of the "seat" of arbitration proceedings in Hong Kong. The applicable law provision, which indicated that Indian law would govern the agreement, was differentiated both by its interpretation and section 2(2) of the Act, which prohibits section 11 from being applied to international commercial arbitrations heard outside India.
CONCLUSION
The ‘seat’ and ‘venue’ of the arbitration are crucial to any arbitration proceeding. In the Mankastu case, the SC determined the seat of arbitration based on the parties' intention after referring to other clauses of the MoU. The confusion and ambiguity in the past judgments call for simplicity and certainty while drafting agreements. The ‘seat’ and ‘venue’ of the arbitration must always be specified in the arbitration agreement.
LINKS REFERRED:
https://www.obhanandassociates.com/blog/determining-the-seat-of-an-arbitration/
https://indiacorplaw.in/2020/03/supreme-court-reopens-the-issue-of-venue-versus-seat.html
[1] Arbitration Petition No. 32 of 2018.
[2] Bharat Aluminium Co. (BALCO) v. Kaiser Aluminium Technical Service, Inc., 2012) 9 SCC 552.
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 Foundation shall not be responsible for any errors caused due to human error or otherwise.
- INTRODUCTION
- PERUSAL OF FACTS
- DECISION AND CONCLUSION
