I. Introduction: Enforcement of Domestic Awards and Foreign Awards - Distinction
Before the commencement of the 1996 Act, there were certain differences regarding enforcement of domestic awards and foreign awards under the two enactments of 1940 and 1996. In the 1940 Act, Section 17 made clear (apparently in the case of domestic awards) that once a judgment was pronounced according to the award, a decree shall follow which always could be executed under the provisions of the Code of Civil Procedure. The said Act was silent about enforcement of foreign awards.
However, being a party to the Multilateral International Conventions, viz. the Geneva Convention of 1927 and the New York Convention of 1958, India enacted two legislations for enforcement of foreign arbitral awards:
Historical Legislative Framework for Foreign Awards
It is relevant in this context to note that the Geneva Convention suffered from certain defects which hampered the speedy settlement of disputes through arbitration, and thus the New York Convention was entered into. The New York Convention seeks to remedy those defects by providing for much more simple and effective methods of obtaining recognition and enforcement of foreign awards.
II. Post-1996 Act Framework
By the enactment of the Arbitration & Conciliation Act, 1996, adequate provisions have been brought in for enforcement of both domestic awards and foreign awards under the same Act. Enforcement of domestic awards has been brought under Chapter VIII of Part I which contains only two sections: Sections 35 & 36.
Provisions for enforcement of foreign awards under New York Convention are provided under Part II, Chapter I consisting of Sections 44 to 52, whereas enforcement of Geneva Convention awards has been brought under Part II, Chapter II consisting of Sections 53 to 60.
III. Enforcement Conditions Under Different Conventions
The conditions to be satisfied in order to obtain recognition or enforcement of a foreign arbitral award under the Geneva Convention are the following:
Geneva Convention Enforcement Conditions
Even if these conditions are fulfilled, the recognition and enforcement of the award could be refused if the court is satisfied that (a) the award is annulled, (b) sufficient notice of the arbitration proceedings is not given to the party; and (c) the award does not deal with contemplated differences.
The party against whom the award under New York Convention is sought to be enforced can object to recognition and enforcement of the foreign award on the following grounds:
New York Convention Objection Grounds
IV. Setting Aside Awards: Domestic vs Foreign
An interesting feature in this respect is that though Chapter VII under Part I deals with enforcement of domestic arbitral awards, it contains only two sections: Section 35 and 36. The two conditions which have to be necessarily satisfied before enforcement of award under S. 36 are: (i) time for making an application to set aside the award has to expire and (ii) such application having been made, it has to be refused. This makes it clear that the legislature has wisely given ultimate power to the court to look into the question whether the award is hit by mischief on account of grounds set out under S. 34 on which an award can be set aside.
Again, the Court has been conferred similar powers in the case of foreign awards in respect of the New York Convention awards on account of grounds set out under Section 48 and in respect of the Geneva Convention awards on account of grounds set out under Section 57. The difference between the two is: in the case of domestic awards, court can set aside the award whereas in the case of foreign awards it is limited to refusal to enforce it, and no power has been conferred on the court to set aside the award as such.
It is to be pointed out that the new law affords only a restrictive right to the courts in India to refuse enforcement of a foreign award, and this is in accordance with the wishes of the international commercial community to the effect that judicial control on the award should be restricted to the barest minimum possible.
V. UNCITRAL Model Law Comparison
The Supreme Court in Sudaram Finance Ltd. Vs. NEPC India Ltd., (1999) 2 SCC 479 = AIR 1999 SC 565 has observed that the provisions of the 1996 Act have to be interpreted being uninfluenced by the principles underlying the 1940 Act, and in order to get help in construing the provisions of the said Act, it is more relevant to refer to the UNCITRAL Model Law rather than the 1940 Act.
The striking differences between these two classes of awards under the UNCITRAL Model Law and the 1996 Act are:
Comparison: UNCITRAL Model Law vs 1996 Act
VI. Procedural Challenges in Enforcement
When we come to the question of enforcement of foreign awards under the 1996 Act, Sections 47 and 56 (made applicable to foreign awards in the New York Convention and Geneva Convention respectively) make it obligatory on the party applying for enforcement of the foreign awards to produce the original award or a duly authenticated copy as also the original arbitration agreement or a duly certified copy thereof along with necessary evidence to prove that the award is a foreign award coming under the definition clause vide Sections 44 and 53.
In this context, it is to be borne in mind that in the case of domestic awards, there is no provision making it obligatory on the party who desires to enforce the award to cause the original award to be filed or request the court to call upon the arbitrator or the custodian of the award to file the award and/or the appurtenant documents relating to the award before the court.
From experience, it is found that lack of such a provision either making it incumbent upon the arbitrator to file the award before the Court or making it obligatory on the part of the party who wants to enforce the award/impeach the award, to take steps for filing of the award and records before the court, causes considerable difficulty. There is no provision making it obligatory for the court to call for the original award and such records.
VII. Enforcement Under General Law
Once awards get over the hurdles of S. 34 in the case of domestic awards, or satisfy the conditions set out in Sections 48 and 57 in the case of foreign awards, they are deemed to be a decree of the court and enforcement of such award/decree shall be subject to the provisions of general law i.e. the Code of Civil Procedure in India, like any other ordinary decree of civil court.
'Court' in all these instances means the same court i.e. the principal Civil Court of original jurisdiction in a district including High Courts in exercise of its ordinary original civil jurisdiction, having jurisdiction of the award if the same had been the subject-matter of a suit by virtue of the definition clause 2(e), in respect of domestic award. Explanations under Sections 47 and 56 of the 1996 Act also refer to the same court in respect of foreign awards.
VIII. Grounds for Setting Aside Domestic Awards
Under section 34(2) of the Act, an arbitral award rendered in India may be set aside if the applicant furnishes proof that:
Grounds for Setting Aside Domestic Awards
Additionally, a court can set aside an award if it finds that the subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force or the arbitral award is in conflict with the public policy of India.
IX. Enforcement of Foreign Awards and Ship Arrest
The Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017, which came into force on 01 April 2018, is silent on enforcement of Arbitral awards by arrest of vessel by High Court exercising its Admiralty jurisdiction. Be that as it may, the Admiralty Act is also silent on arrest of vessel to secure an Award in a pending or future Arbitral proceeding.
However, it has been held by Courts in India even in cases filed after the coming into force of the Admiralty Act, 2017 that the principle enunciated in the M.V.Elisabeth judgment is still applicable even after the enactment and coming into force of Admiralty Act, 2017: where Statutes are silent, the remedy has to be sought by reference to the basic principle; that it is the duty of the court to devise procedural rules by analogy and expedience.
It was held by Bombay High Court that procedure can be devised to permit a party who has agreed to submit disputes to arbitration to secure its claim in arbitration, provided there is no explicit legislation barring the same.
X. Enforcement Mechanisms and Future Outlook
The growth of international commerce has necessitated the creation of efficient methods of resolution of disputes. In some situations, securing an award or a final judgment from the courts may only be a battle half won; this is especially true in the Indian context.
We have come across situations where the opposite parties decide to not participate in the arbitral process or abandon it mid-way. The enforcement of these awards/judgments where the party is in absentia is sometimes more complicated than one where the opposite party has participated in the proceedings.
The procedure for enforcement and execution of decrees in India is governed by the Code of Civil Procedure, 1908 (CPC) while that of arbitral awards in India is primarily governed by the Arbitration & Conciliation Act, 1996 (Act) as well as the CPC.
Domestic and foreign awards are enforced in the same manner as a decree of the Indian court. This is true even for consent awards obtained pursuant to a settlement between parties. However, there is a distinction in the process for enforcement of an award based on the seat of arbitration.
While there are no statutory provisions clearly stipulating the procedure for arrest of a vessel in enforcement of a Foreign Award, based on decided case laws and the prevailing development of Indian law, it appears quite possible to enforce foreign awards against a vessel whilst in India.