Enforcement of Foreign Arbitral Awards in India
Alternate Dispute Resolution (ADR), mainly denotes a wide range of dispute resolution processes that act as a means of disagreeing parties to come to an agreement without using the means of litigation. It is a collective term that refers to the ways in which the parties can settle disputes, with the help of a third party. It is also known as external dispute resolution (EDR). ADR has gained widespread acceptance among both the general public and the legal profession in recent years and is also being adopted as the means to help settle disputes alongside the court system itself. Among all the other forms of Alternative Dispute Resolution (like mediation, conciliation, and negotiation), arbitration has gained widespread recognition globally. In the process of Arbitration, there has to be a valid Arbitration Agreement between the parties prior to the emergence of a dispute for the process of arbitration to exist. In this method of dispute resolution, the parties refer the dispute to a third party, who is appointed as an arbitrator. The decision of the arbitrator is binding on both the parties and his decision is given in the form of an award. International Arbitration has seen immense growth especially since the New York Convention on International Arbitration.
The enforcement of foreign arbitral awards is based on the concept of minimal judicial intervention and to support India’s pro-arbitration and pro-foreign investment goals In India, the process of arbitration is governed by the Arbitration & Conciliation Act, 1996. However, recently in Campos Brothers Farms vs. Matru Bhumi Supply Chain Pvt. Ltd., the Delhi High Court refused to enforce a foreign arbitral award under the Arbitration & Conciliation Act. Prior to the Arbitration & Conciliation Act, 1996, it was the Foreign Awards (Recognition & Enforcement) Act, 1961, that governed the laws related to the enforcement of foreign arbitral awards. It is in Section 7 of the same act, that the present provision for the enforcement of foreign arbitral awards in India is based. It was after the Foreign Awards Act that the Arbitration & Conciliation Act followed. However, the act did not bring any effective change. Section 48(1) of the said act corresponds with Section 7(1) of the Foreign Awards Act. It must be mentioned that the Arbitration & Conciliation Act did not vastly represent the policies of the Foreign Awards Act and hence, there was a need for amendment.
The issues regarding the enforcement of the foreign arbitral award were eventually remedied in 2015 through the Arbitration & Conciliation (Amendment) Act. The amendment added two explanations to the existing Section 48(2) of the act, which aimed at regulating the discretion available to the courts while interpreting the terms 'public policy' and 'fundamental policy of Indian law'.
As per the first explanation, a foreign award will conflict with public policy only if it:
- was induced by fraud or corruption;
- contravenes the fundamental policy of Indian law; or
- contravenes the basic notions of morality and justice.
The 2015 amendment further added a second explanation by which it clarified that a contravention of the fundamental policy of Indian law will not entail a review on the merits of the dispute.
It is after the 2015 amendment that judicial intervention has become limited in arbitration proceedings especially in cases relating to the enforcement of arbitral awards. The amendment was necessary to limit the act from becoming just another piece of legislation.