Territorial Jurisdiction In Arbitration
Laws governing arbitration in India have evolved at a brisk pace over the past few years. The Indian Arbitration & Conciliation Act, 1996 ("Act") was amended recently in 2015, with the express intention of making arbitration the preferred mode of resolving commercial disputes.
We've set down some recent learnings and judicial trends in commercial arbitrations here. We hope you find these interesting.
Litigation arising from foreign arbitral awards: The definition of 'court' under the Act was amended in 2015 to facilitate international commercial arbitrations. If the subject-matter of a foreign arbitral award lies in India, the state High Court having jurisdiction over it has been empowered to entertain certain matters in connection with foreign awards. These include seeking interim relief, and appeal against such interim relief. What this means: Foreign arbitral award holders seeking to secure the amount decreed by the arbitral tribunal can approach the relevant state High Court to seek an interim order restraining the respondent from alienating/ disposing off/ creating third party rights over the subject matter of the dispute. Note that this relief will not be available if parties have specifically agreed to exclude Part I of the Act.
Conferring jurisdiction on a neutral court: When the parties to an arbitration agreement are all Indian, the parties have the option to choose a neutral arbitration 'venue', regardless of whether any cause of action may have arisen in such venue. The Indian Supreme Court in 2017 clarified this in Indus Mobile Distribution. Vs. Datawind Innovations. What this means: Parties can choose a neutral venue depending on their convenience. However, also carefully consider where you would like the arbitration's 'seat' to be – see S. No. 4 below.
Intent of Parties: To avoid a court having to decipher unclear arbitration provisions, parties should clearly set out the seat and venue of arbitration, and governing law. What this means: Parties must spell out their intention in clear words with respect to applicable laws, dispute resolution mechanism and jurisdictional provisions. Also, you should consider clarifying the language of arbitration, number of arbitrators, and whether you would like the award to be kept confidential.
Conflicting provisions in an arbitration agreement: In institutional arbitrations, there can be conflicting terms regarding the 'venue' and 'seat'. For example, parties may agree New Delhi as the 'venue', and Gurgaon as the 'seat', with Mumbai courts to resolve disputes. Designating Gurgaon as the 'seat' would mean that courts there have exclusive jurisdiction to decide disputes. In such cases, if a party approaches Mumbai courts for certain reliefs (for e.g., interim reliefs) the court's jurisdiction may be disputed by the other party. If challenged, courts may revert to equitable principles under the (Indian) Civil Procedure Code, 1908 ("CPC") to determine who has jurisdiction. In our example, courts in Mumbai, where a party runs its business, may be given preference over the agreed 'seat' (i.e., Gurgaon).
What this means: Parties should clearly set out their understanding in the agreement to avoid application of CPC. This makes the drafting of an arbitration clause particularly important, especially if the parties are not sited in the same place.