The role of seat in international commercial arbitration


Essay, 2018
11 Pages, Grade: 5.10/7

Excerpt

Table of Contents

1. Distinction between venue and seat

2. Bhatia to Balco - From party centric to seat centric

3. Subsequent judgements

4. Prospectivity of Balco

5. Subsequent amendment in the law

6. Is Bhatia really overruled?

7. The correct test

8. Conclusion

Abstract

Seat of arbitration assists in determining the curial law that would govern the arbitration proceedings. Prior to the Balco judgement, the law was clear that mere choice of a foreign seat will not exclude the applicability of Part I of the 1996 Act. The Balco judgement rectified this error in the interpretation and held that the choice of the seat of arbitration is akin to the exclusive jurisdiction clause. However, the judgement was applicable only prospectively. Balco judgement also created much confusion which was settled by subsequent judgements and amendments in the Act.

This essay attempts to examine the role of seat in international commercial arbitration in the light of Balco and other recent judgements delivered by the apex court.

1. Distinction between venue and seat

In common parlance, the term “venue” refers to a place where a particular event takes place. In arbitration law, venue is understood as a place where arbitration takes place. Seat, on the other hand, is used to refer to a juridical seat. Seat is the decisive factor when it comes to deciding the lex arbitri or the law of arbitration. In PCP International Limited v. LANCO Infratech Limited [1], Delhi High Court observed that 'seat' means the place where court is, which has the territorial jurisdiction with respect to the subject matter/cause of action of the matter, and venue is the place, which is a place where the arbitral tribunal sits to hold the arbitration proceedings and which sitting of the arbitral tribunal need not be at the place where the 'seat' of arbitration is located.

However, this distinction has been diminished to a certain extent by the Supreme Court in Balco case where it had ruled that the mere choice of place of arbitration outside India inevitably imports that the law of that country will apply to the proceedings even if the contract specifies otherwise.

2. Bhatia to Balco - From party centric to seat centric

In Bhatia International v. Bulk Trading S. A. & Anr,[2] Supreme Court relied upon “party-centric principle” and held that Indian courts will have jurisdiction to entertain objections unless the parties exclude it by an agreement, express or implied. Court reached its decision based on the following reasoning:-

1. By not specifically providing that the provisions of Part I will apply to international commercial arbitrations held out of India, the intention of the Legislature appears to favour the parties to provide by an agreement that Part I or any provision therein will not apply.
2. If there is no provision to the contrary, the provisions of Part I will apply to "foreign awards". The opening words of Sections 45 and 54, which are in Part II, read "notwithstanding anything contained in Part I." Such a non-obstante clause was put to use because the provisions of Part I apply to Part II.
3. The definition of "international commercial arbitration”(under 2(f)) makes no distinction between international commercial arbitrations which take place in India or internal commercial arbitrations which take place outside India.[3]
4. The omission of the word "only" in Section 2(2) indicates that this sub-section is only an inclusive and clarificatory provision.[4] Thus, there was no necessity of separately providing that Section 9 would apply.

The decision in Bhatia case was heavily relied in Venture[5] case and other cases until it was overruled prospectively by the Balco case. Prior to Balco, in Videocon [6] and Yograj [7] cases, Supreme Court had held that it had no jurisdiction to interfere because parties had agreed to exclude operation of Part I by an agreement. In Balco case, the Court relied upon the “seat-centric principle” and held that choice of seat is akin to exclusive jurisdiction clause. It is not a matter of choice. Once the parties agree to a place where the arbitration proceedings take place, even if they agree otherwise, municipal courts are not ousted of their jurisdiction.

[...]


[1] MANU/DE/2061/2015

[2] AIR 2002 SC 1432

[3] Arbitration and Conciliation Act, 1996, Sec 2(1)(f)- “international commercial arbitration” means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is— (i) an individual who is a national of, or habitually resident in, any country other than India; or (ii) a body corporate which is incorporated in any country other than India; or (iii) 1 an association or a body of individuals whose central management and control is exercised in any country other than India; or (iv) the Government of a foreign country

[4] Arbitration and Conciliation Act, 1996, Sec 2(2)-This Part shall apply where the place of arbitration is in India. (Before 2015 amendment)

[5] AIR 2008 SC 1061

[6] Videocon Industries Limited vs. Union of India & Anr ( 2011) 6 SCC 161

[7] Yograj Infrastructure Limited vs. Ssang Young Engineering and Construction Co. Ltd (2011) 9 SCC 735

Excerpt out of 11 pages

Details

Title
The role of seat in international commercial arbitration
College
Damodaram Sanjivayya National Law University
Course
BA LLB(Hons.)
Grade
5.10/7
Author
Year
2018
Pages
11
Catalog Number
V388166
ISBN (eBook)
9783668630222
ISBN (Book)
9783668630239
File size
528 KB
Language
English
Quote paper
Abhinav Mishra (Author), 2018, The role of seat in international commercial arbitration, Munich, GRIN Verlag, https://www.grin.com/document/388166

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