PLACE OF ARBITRATION: SEAT Vs. VENUE
(AN END TO THE ONGOING DEBATE))
With the emergence of open market in India there has arisen the need for such mechanism which can dispose and adjudicate the disputes quickly and efficiently. Ever since, the Arbitration mechanism for resolving disputes was introduced in India in 1996, it advanced a controversy concerning the seat and venue of arbitration. The subject becomes of utmost signification to decide the question of supervisory powers over the arbitral proceedings. Every arbitration must have a “Locus arbitri” or the place of arbitration which governs the proceedings of the arbitration and have supervisory powers over the arbitration. The terms “seat” and “venue” often sounds mystifying for deciding the jurisdiction.
Section 20 of the Arbitration and Conciliation Act, 1996 alludes to the place of arbitration but it does not set out the distinction between seat and venue. In general, the “seat” is a place where the court have supervisory and governing powers over the arbitral proceedings. However, the “venue” is a place where the proceedings of arbitration such as hearing of witnesses, experts or the parties or the inspection of goods and properties are concluded.
Even now, there were many discourses among the parties, till the argument is settled by the apex. In BGS SGS SOMA JV. Vs. NHPC Ltd., the supreme court partly relying on the ratio furnished in Bharat Aluminium and Co. vs. Kaiser Aluminium Technical Service, Inc. and overruling Antrix Corporation Ltd. Vs. Devas Multimedia Private Ltd. The supreme court decided on two issue: former was, whether the designation of “seat” is akin to an exclusive jurisdiction clause? ; and later was, what is the test to determine the “seat” of arbitration?
The court held that if the parties have chosen a seat would necessarily intend that courts have exclusive jurisdiction. Whereas, by replying upon the “Shashoua Principle” laid down in Roger Shashoua & Ors. Vs. Mukesh Sharma, the supreme court set out that when the venue is designated without specifying the seat of the arbitration in the arbitration agreement then the stated venue is the juridical seat of arbitral proceedings. The courts put emphasis on the language of the arbitral agreement. When the venue is designated for ‘arbitral proceedings” then it can be considered as seat but where the venue is designated for the purpose of hearing or inspections then it may signify that such place is only a venue.
Union of India vs. Hardy Exploration and Production (India) Inc., which provided the contrary view was declared as bad law, as it does not follow the “Shashoua Principle” which was considered in BALCO case. Furthermore, it was held that if the seat as well as venue are not set out by the parties or the arbitrators then the court where the earliest application for interim relief has been made under section 9 of the Arbitration and Conciliation Act, 1996 and where part of cause of action may have arisen, will have exclusive jurisdiction over the arbitral proceedings.
Hence, the ratio stated by the apex has settled the subject for now, putting an end to the forgoing debate over seat and venue.