“Pro-Enforcement Bias” Towards Foreign Arbitral Awards Domestically, in light of Vijay Karia and Ors. V. Prysmian Cavi E Sistemi S.R.L and Ors.

Must Read

What is the Real Estate (Regulation and Development) Act, 2016?

The Real Estate (Regulation and Development) Act, 2016 (“RERA”) is an Act of the Parliament. It seeks to protect...

Should the Exorbitant Amounts Charged for RT-PCR Tests be Refunded?

Introduction A plea has been filed in the Honourable Supreme Court of India seeking a refund of exorbitant amounts charged...

Should CCTV’s be Installed in the Police Station?

Introduction In a recent judgment, the bench led by Justice Nariman issued directions to both the state and Union Territory...

A Legal Analysis of the West Bengal Political Crisis on IPS Deputation

The Ministry of Home Affairs (MHA) has recently summoned three IPS officers of West Bengal (WB). The decision was...

Explained: Postal Ballot for NRIs

At the end of November 2020, Election Commission sent a proposal to the law ministry to amend the Representation...

Explained: Constitutional Provisions and Legislations With Regards to a Person with Disabilities

The world celebrates December 3 as International Day of Persons with Disabilities (IDPD). This day is also called World...

Follow us

International Arbitration faces challenges domestically due to unharmonized local laws for enforcement. Often it may occur that an award may be unenforceable or challenged on the grounds of non-enforceability due to varying laws. But a global attempt at harmonisation is underway spearheaded by courts and legislations. This is primarily to make their jurisdictions arbitration-friendly and to guarantee an equitable chance at enforcement of foreign awards.

Relevant Background of the Case

The Supreme Court of India in its judgement cleared the uncertainty regarding domestic enforcement of foreign arbitral awards in India. The judgement was regarding four arbitral awards passed by the London Court of International Arbitration (“LCIA“). The enforceability of the awards was stalled by the Appellant who approached the Bombay High Court and subsequently, the Supreme Court under Article 136 of the Constitution of India. The challenge was based on inter alia, grounds including substantive grounds as well as on the merits of the award. The aspects of appealing the rejection of an award’s unenforceability and the violation of domestic laws by enforcement of such awards, deserve special discussion.

Relevant Legal Provisions

The Hon’ble Court reasoned strongly against the practice of exhausting all possible recourse against enforcement of foreign awards. There is a provision under Section 48 of the Arbitration and Conciliation Act, 1996 (“Act“) for challenging the enforcement of foreign arbitral awards and in this case, the Bombay High Court rejected the challenge under the said Section. Despite not having a remedy under Section 50 of the Act, the case was appealed under Article 136. The Court is granted limited jurisdiction under Article 136. The grounds of challenge were on substantive issues such as impartiality of arbitrator and lack of opportunity of being heard. The Court reasoned that such issues ought to have been dealt with at the stage of the arbitral proceedings itself. The Appellant had not brought up such issues before the LCIA but only at the stage of enforcement.

Court’s Reasoning

The “pro-enforcement bias” of domestic courts was highlighted under the New York Convention on Enforcement of Foreign Arbitral Awards, 1958 which clearly sits on the philosophy that the parties had a better chance at challenging the award at the lex situs arbitri compared to having a right to challenge it at the enforcement stage. The Court reasoned that issues of denial of a fair hearing would amount to a violation of natural justice principle. A lack of jurisdiction claim would nullify the award and it was opined that ought not to be discussed at the stage of enforcement at the domestic level, but at the seat of arbitration.
One of the awards directed the Appellant to sell its shareholding at a discounted price to the Respondent for material breaches of Joint Venture Agreement between them. The Act allows for a stay on enforcement of foreign arbitral awards in India for reasons inter alia, being violative of the “fundamental policy of Indian law”. The Appellant contended that such a sale at a discounted price to a foreign entity was violative of Foreign Exchange Management Rules (Non-Debt Instruments), 2019 (“FEMA“) and thereby violative of the fundamental policy of Indian law. The Court rejected this argument citing a previous case of the Delhi High Court which held that “fundamental policy of Indian law” referred to as the backbone of Indian laws and not a mere violation of any individual enactment. This is pertinent to note because foreign arbitral awards are usually based on the agreed law between the parties which in several cases would be foreign law. More often than not it would be inconsistent with domestic laws.
It reasoned that if such objections were allowed then enforcement of most international awards would be impossible. This would defeat the pro-enforcement bias which is to be followed as well as the nation’s obligations under international law.
However, this does not mean that foreign awards give parties a free pass at escaping domestic laws. While the enforcement of the award is allowed, the relevant regulatory authority would step in, in this case, the Reserve Bank of India (RBI), and proceed accordingly.

Critical Analysis

The development of domestic jurisprudence in light of international law is a welcome step at harmonizing domestic laws across the world or an attempt at it by harmonizing enforceability of cross-border settlement awards. It is also a way ahead for parties trying to exhaust every available method to avoid enforcement of awards with the Court imposing hefty costs amounting to Rs. 50 Lakhs (6,60,000 USD). It acts as a deterrent for arguing such matters as a “first appeal” under Article 136 of the Constitution of India, having such a limited scope.


International commercial law is marred with issues such as these at the domestic level. On one hand, the parties spend time and considerable money to settle disputes through arbitration for speedy disposal of issues. On the other, the stage of enforcement presents new challenges which deter the timely settlement of disputes. Settlement of disputes form an integral part of ease of doing business and this development surely clears the murky waters around the same.

Libertatem.in is now on Telegram. Follow us for regular legal updates and judgements from the court. Follow us on Google News, InstagramLinkedInFacebook Twitter. You can also subscribe for our Weekly Email Updates. You can also contribute stories like this and help us spread awareness for a better society. Submit Your Post Now.


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Latest News

[WhatsApp Privacy Policy Row] It’s a Private App, Don’t Use It; Says Delhi High Court

On Monday, while hearing a petition regarding the privacy policy of WhatsApp, the Delhi High Court said, “It is a private app. Don't join it. It is a voluntary thing, don't accept it. Use some other app.”

Madras High Court Asks the State To Reconsider Number of Seats Allotted for Bcm Category

Mr. Shakkiya filed a Writ Petition under Article 226 of the Indian Constitution to issue a Writ of Mandamus. The petition sought to direct...

Gujarat High Court Directs To Register Name of Petitioners in the Society Records as Owners of Property, as per Will

A single-judge bench of Gujarat High Court consisting of Honourable Justice Biren Vaishnav, because probate wasn’t necessary and that the petitioners were entitled to...

If No Complaint Is Filed, No Further Orders Are Required To Be Passed: Telangana High Court

Excerpt In Matlakunta Sundaramma vs The State Of Telangana, on January 8, 2021, the Telangana High Court decided that there is no requirement of passing...

Gujarat High Court Allows Report Filed by Official Liquidator for Dissolution of the Company

The present report had been filed by the Official Liquidator for the dissolution of M/s AtRo Limited under the provisions of Section 497 (6)...

Parents of Road Accident Victim Entitled To Compensation: Delhi High Court

Justice JR Midha said, “Even if parents are not dependent on their children at the time of an accident, they will certainly be dependent, both financially and emotionally, upon them at the later stage of their life, as the children were dependent upon their parents in their initial years.”

Plea Challenging the AIBE Rules Framed by BCI Filed in the Supreme Court

A Writ Petition was presently filed in the Supreme Court by a newly enrolled lawyer challenging the All India Bar Examination Rules 2010 which have been framed by the Bar Council of India which mandates that an advocate has to qualify for the All India Bar Examination (AIBE) to practice law after enrollment.

Bombay High Court: Mere Presence at the Crime Scene Not Enough for Punishment

The Bombay High Court ruled that it cannot be considered a crime if a person is merely present at the crime scene which falls under the Maharashtra Prohibition of Obscene Dance in Hotels and Restaurants and Bar Rooms and Protection of Dignity of Women Act 2016. It also quashed two First Information Reports (FIR) against two individuals who were arrested in a raid at a dance bar by the Santacruz Police, in 2017.

CAIT Files a Plea Against WhatsApp’s New Privacy Policy in the Supreme Court

Confederation of All India Traders (CAIT) has filed a petition against WhatsApp’s new privacy rules in the Supreme Court. The petition says that WhatsApp which is known to render public services by providing a platform to communicate has recently imposed a privacy policy that is unconstitutional, which not only goes against the fundamental rights of citizens but also jeopardizes the national security of our country.

RTI Activist Files a Plea in Bombay High Court Against Bharat Biotech’s Covaxin

On Saturday, a plea has been filed before the Bombay High Court by an activist stating that Bharat Biotech Covaxin had not been granted full approval but a restricted use in clinical trials according to the Drugs Comptroller General of India. The Company's phase 3 trials are ongoing and the DGCI has not made any data available in the public domain for peer- review by independent scientists.

More Articles Like This

- Advertisement -