Appeal for Sovereign Immunity of Foreign Countries for Enforcement of Arbitral Awards - Revision
In a landmark decision, the Delhi High Court declared that a foreign state cannot invoke sovereign immunity from enforcement of arbitral awards arising from commercial transactions. The Honorable Judge J. R. Midha's SingleJudge Bench compiled the two motions1 as they involve the same matrix of facts and the resolution of common legal issues. The plaintiffs sought to enforce the arbitral award against foreign countries, namely the Islamic Republic of Afghanistan and the Ministry of Education of the Federal Democratic Republic of Ethiopia, respectively.
The Honorable Court, in its wisdom, has raised two important questions of law in hearing the motions:
- Is the prior consent of the central government required under Section 86 (3) of the Code of Civil Procedure to enforce an arbitral award against a foreign state?
- Can a foreign state claim sovereign immunity from the enforcement of an arbitration award resulting from a commercial transaction?
This section examines the justification given by the Court for resolving the above-mentioned problems in the context of various decisions of the Supreme Court and certain High Courts.
Central government prior consent is required for enforcement of an arbitral award
The complainant argues that prior consent from the central government is not required under Section 86(3) of the Code of Procedure Civil year 1908 (hereinafter referred to as "BLTTDS") for enforcement of an arbitral award against a foreign state. Furthermore, it has been argued that the requirement for prior consent for a final and binding arbitration award cannot be included in the Arbitration and Conciliation Act and this would defeat the purpose of the law because the primary reason for the passage of the Law on Arbitration and Conciliation was to ease the procedural aspect of litigation for the parties with a few exceptions. In addition, the creation of a legal fiction under Section 36 of the Arbitration and Conciliation Act was made to enforce the arbitral award as an "ordinance" by giving it legality and validity. . However, a legal fiction is not intended to classify it as an "ordinance" under the CPC. The plaintiffs believe that strict application of the provisions of Section 86 (3) may lead to violations of three basic principles of the Law on Arbitration and Conciliation: Courts shall conduct trial quickly and fairly; full party autonomy and minimal court intervention, as held by the Honorable Apex Court in Satyawati v. Rajinder Singh. The petitioner relied on a series of Supreme Court rulings, including the landmark decision of Bharat Aluminum v Kaiser Aluminum Technical Services Ltd. where the Hon`ble Apex Court made a distinction between domestic and foreign arbitral awards in the context of the two types of arbitration taking place in India.
(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.)