THE CRITICAL ASPECT OF THE SEAT OF ARBITRATION
THE CRITICAL ASPECT OF THE SEAT OF ARBITRATION
The arbitration seat is a vital element of any arbitration case. Each arbitration must have a "seat" or "locus arbitri" or "forum" which determines not only the governing law for the conduct of arbitration proceedings but also which courts will have supervisory powers over the arbitration and the scope of those powers, in particular concerning the enforcement of awards.
On 10 December 2019, in its judgment entitled BGS Soma JV vs NHPC Ltd., the Honorable Supreme Court of India decided on important issues concerning the definition of arbitration clauses in agreements with respect to the seat/run of arbitration proceedings, along with the scope of appealable orders under the Arbitration and Conciliation Act, 1996 ("Act"). The judgment was handed down by a trial bench consisting of the judges Rohinton Fali Nariman, Aniruddha Bose, and V. Ramasubramanian, where the bench declared its earlier judgments in the Union of India Vs. Hardy Exploration and Production (India) Inc. ("Hardy Exploration") and Antrix Corporation Ltd. Vs. Multimedia Devas Pvt. Ltd. ("Antrix Corporation") to be lawless.
The Hon'ble Court delved into a multitude of cases to lay down rules for deciding the "seat" of arbitration, arguing, inter alia, that the "venue" is simply the "seat" of the arbitration proceedings in the absence of any other relevant contrary meaning. Besides, the Court also dealt with the scope of appealable orders according to Section 37(1)(c) of the Act and held that an appeal against an order for the transfer of proceedings under Section 34 is untenable pursuant to Section 37 of the Act.
CHECKED FOR DETERMINATION OF SEAT
In paragraph 63 of the judgment, the Supreme Court observed: "Therefore, wherever there is an express designation of a 'course' and no designation of any alternative place as a 'seat,' there is a combination of a supranational body of arbitration rules and no other significant contrary indication, the inexorable inference is that the place of arbitration mentioned is, in fact, the place of jurisdiction of the arbitration proceedings. Paragraph 84 that if the place of arbitration in the arbitration clause is designated as the" court "of the arbitration proceedings, the word" arbitration proceedings it would make it clear that the "court" is, in fact, the "site" of the arbitral proceedings, since the aforementioned expression does not include only one or more individual or particular hearings, but the proceedings as a whole, including the awarding at that place.
Furthermore, the Clause does not state that the venue is for some or all of the hearings to be held on the site; nor does it use language such as 'the Tribunal may meet' or 'may hear witnesses, experts or parties.' The term "shall be kept" also implies that the so-called "location" is the arbitral proceedings' "position." This combined with no other substantial contrary suggestion that the location is merely a "location" and not a "space," will then prove conclusively that such a provision designates the arbitration "space."
JUDGMENT CORRECTNESS ON HARDY EXPLORATION
In paragraph 93 of the judgment, the Supreme Court held that the Three-Judge Bench in Hardy Exploration had failed to apply the Shashoua principle to the arbitration clause in question, according to which the response should have been that Kuala Lumpur, who had been declared the 'right' of arbitration proceedings, was governed by the UNCITRAL Model Law, would be governed by a supranational set of laws, and there is no other contrary indication, it would be clear that Kuala Lumpur would be the juridical 'seat' of the arbitration and therefore, the Bench did not obey the law as to the determination of juridical seat laid down in BALCO. The Court, therefore, ruled that "Hardy Exploration and Production (India) Inc. (supra), being contrary to BALCO 's Five Judge Bench (supra), can not be deemed good rule."
ARBITRATION IN THE PRESENT DISPUTE WHAT IS THE SEAT?
Applying the Shashoua theory to the matter in question, the Supreme Court held that the arbitration provision in the appeal in question signified that all the proceedings, including the making of the award, had to take place at one of the specified places i.e. Faridabad / Delhi. The phrase "shall be held" also indicated that the so-called "venue" was the arbitration proceedings' "seat" really. Nevertheless, as all the three appeals were eventually held at New Delhi, the inference that was made was that the parties preferred New Delhi as the seat of the arbitration under Section 20 (1) of the Act. Hence, courts at New Delhi alone had the jurisdiction over the arbitration proceedings and the fact that a part of the cause of action occurred in Faridabad was insignificant once the seat was selected. Hence, the High Court 's judgment was set aside and the petition of Section 34 was ordered to be brought before the New Delhi Courts.
CONCLUSION AND ANALYSIS
The Supreme Court has inarguably held that a place or venue is effectively the juridical seat unless there is any indicator of a contrary intention of the parties. The Court has not only provided the much-needed clarity on the issue of the arbitration proceeding 's legal seat, but it has also established tests for determining the same. Consequently, the judgment also clarifies certain grievous aspects relating to the issue of seat/location/place of arbitration and also points out the importance of selecting a seat at the very beginning of the arbitration, since the same would also be relevant in determining the jurisdiction of courts with supervisory jurisdiction over the proceedings. However, it is to be kept in mind that the judgment has been pronounced by a Three-Judge Bench, which is the same as in the case of Hardy Exploration. Hence, there is rather a chance that the judgment would not have an overruling effect on Hardy Exploration and the case would be referred to a larger bench for determination.
- CHECKED FOR DETERMINATION OF SEAT
- JUDGMENT CORRECTNESS ON HARDY EXPLORATION
- ARBITRATION IN THE PRESENT DISPUTE WHAT IS THE SEAT?