module_2_9_

INTERNATIONAL
COMMERCIAL ARBITRATION

CERTIFICATE COURSE

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DEVELOPED BY

SU Shah &
Associates

MODULE - 2

INTERNATIONAL COMMERCIAL
ARBITRATION WITH SEAT IN INDIA

2.1. INTRODUCTION the power of the Indian Judiciary to interfere with the
matters of arbitration seated outside of India.
“For an Arbitrator goes by equity of a case, a judge by
law, and arbitration was invented with the express 2.2. INTERNATIONAL COMMERCIAL
purpose of securing full power for equity.” ARBITRATION:

– Aristotle. In simple terms, Arbitration is a compromise between
the parties involved in dispute wherein the parties
Due to globalization, there has been growth in present their dispute before an impartial arbitrator
international trade and investment which is also for settlement of it and conclusion with their mutual
accompanied by cross border commercial disputes. consent and that decision is binding on the parties.
This brings the need for efficient dispute resolution in Thus Arbitration can also be called as out of court
order to resolve the issue which may arise from settlement of the disputes.
International Commercial Trade. If two individuals
are having any kind of dispute, then it can only be Domestic and international arbitration and the
resolved by the impartial interference of the third enforcement of arbitral awards is dealt under
party. Therefore it is mandatory to have an arbitrator.
In India, the Judiciary handles the international Arbitration and Conciliation Act, 1996 (amended in
arbitration and extra territorial applications of 2015). The Supreme Court in the case of TDM
domestic laws in foreign seated arbitration, but after Infrastructure Pvt. Ltd. V. UE Development India Pvt.
2012 various landmark judgments given by Supreme Ltd,i said that “in spite of a company having a foreign
Court and High Court have declared Indian control, a company which is incorporated in India can
Arbitration Law to be seat-centric and by removing

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only have Indian Nationality for the purpose of the arbitration and also the requirement of the other
act.” The scope of Section 2(1)(f) of the Arbitration party to do something in this regard. Section 21 of the
and Conciliation Act, 1996, has also been explained Arbitration and Conciliation Act, 1996 defines this
which defines the term International Commercial term- “A notice of arbitration has to be served to the
Arbitration as “An arbitration relating to disputes other party, requesting that the dispute to be
arising out of legal relationships, which may be referred to arbitration”.
contractual or not, considered as commercial under
the law in force in India and where at least one of the 2.2.2. Referral to Arbitration:
parties is -
Before entering into any agreement generally, the
i. A person who is a national or a resident of any parties decide the manner in which they resolve their
other country than India; or disputes in order to avoid future conflicts and
confusions. If the subject matter of the dispute is
ii. A body situated in any country other than India; governed by the arbitration agreement then the
iii. A company in which management and control is courts can refer the parties to resolve their disputed
through arbitration primarily. As per Section 8 of the
exercised in a country other than Indian ; applicable act which provides that- if an action is
iv. The Government of a foreign country.” brought before a judicial authority which is a subject
matter of arbitration, upon an application by one
When the seat of International Commercial party, the judicial authority is bound to refer the
Arbitration is in India, before the applicability of the dispute for arbitration.
Amendment Act, 2015 the following are the laws
which are applicable:- Here, the meaning of the words ‘upon an application
by a party’ means that it is essential that the
2.2.1. Notice of Arbitration: application must be made by the party either before
or at the time of making his first statement on the
The Notice of Arbitration is considered as the initial substance of the dispute and the application shall be
step towards the commencement of arbitration. This accompanied by a duly certified or a original copy of
notice has been given to the other party with the the arbitration agreement.
motive of seeking arbitration by communicating the
intention of first party to refer the dispute to

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2.2.3. Interim Reliefs: responsibility of an Arbitrator to ensure that both the
parties get fair trial, and he should also refer to the
This relief is been granted by the courts, in the cases principles of Natural Justice. There is need for the
where there is an urgent need to provide appointment of an arbitrator in the cases where the
rehabilitation to the affected parties. This can be appointed arbitrator denies continuing in the same
given before the decision is made by the court. In position, in this situation the court having jurisdiction
International Arbitration the parties can seek for to intervene to arbitration proceedings and the
interim reliefs from the courts under Section 9 and 17 power is given to Chief Justice of India (CJI) to
of the above mentioned act respectively. appoint an arbitrator.

a. Section 9 - A party may, before, or during arbitral The appointment of arbitrator can be done in two
proceedings or at any time after the making of different ways: -
the arbitral award but before it is enforced, apply
to a court for seeking interim measures and a. Ad hoc arbitration- In an ad hoc arbitration the
protections including interim injunctions. parties are at their own liberty and are free to
appoint an arbitrator and they can appoint whom
b. Section 17 - The arbitral tribunal can also so ever they want subject to only condition that
provide interim measures of protection or ask a they should not be in even number as mention in
party to provide appropriate security in section 10 of the said act.
connection with the matters of dispute, as is
found appropriate during the course of arbitral b. Institutional Arbitration- In this the contract
proceedings. between the parties will contain a clause which
will state the appointment of an institution and
It is important to be noted that the powers of the that the arbitration will be conducted as per the
arbitral tribunal are narrow as compared to the party designated rules. The nature of the dispute
powers of the court. determines the appointment of the institution
E.g., matters relates to banking sector will get
2.2.4. Appointment of Arbitrators: directed towards ABC institute due to their
previous record of arbitration in this particular
The appointment of an Arbitrator is very important sector.
task because he is the one who has the duty to give
decision without any kind of biasness. It is the

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✓ Section 11(4) of the Arbitration and does not lay down any specific qualification
Conciliation Act, 1996 provides the role of for arbitrators. Any person who is of sound
the CJI by the i.e., on the request of the parties mind, attained the age of majority, holds a
the chief justice or the designated institution degree who is a person of knowledge,
shall appoint the arbitrator. integrity, and ability can be an arbitrator. An
arbitration panel includes a wide range of
✓ Section 11 (5) on the failure of the experts belonging to various trades,
appointment of the arbitrator by the parties profession, business. Some arbitral
then on the request of the parties the institutions conducting international
arbitrator shall be appointed by the CJI or the arbitration include foreign arbitrators also.
designated institution. This enables the foreign parties to choose
arbitrator who belong to some other
✓ Section 11(7) the judicial powers of the chief nationality. It depends on the agreement as
justice or the designated institution as the well if the parties to an arbitration agreement
decision given by them in the situations mention in the contract specifically in the
mentioned by them in sub clause (4) and (5) is arbitration clause that the arbitrator should
final. belong to such specific institution and must
be holder of such specific office.
✓ Number of Arbitrator: The number of
arbitrator is depend on the agreement 2.3. CHALLENGE TO APPOINTMENT OF
formed by the parties, if the agreement is ARBITRATOR:
silent about the number of arbitrator then it is
supposed to appoint one arbitrator as per law. The impartiality is an essential condition for an
arbitrator in arbitration proceedings. Absence of
✓ Nationality of Arbitrator: This provision has impartiality is a ground to challenge his appointment.
been made in order to remove any kind of Section 12(1) of the act states that when an arbitrator
biasness. An arbitrator can be of any is appointed for resolving the dispute and if there are
nationality. In case of International any grounds which can create doubts regarding his
Commercial Arbitration, the appointed impartiality or independence, then such arbitrator
arbitrator must be of some other nationality must disclose it in writing.
as compare to the nationality of the
contracted parties.

✓ Qualification of an Arbitrator: The Indian law

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Also Section 12(3) states that an arbitrator may be made by a person approached as a possible
challenged if: arbitrator. If he or she discloses circumstances which
fall under any of the categories specified in the
a. The Situation in which he is placed poses Seventh Schedule, then that person cannot be
questions regarding his independence and appointed as an arbitrator. Since such person would
impartiality; or; lack the inherent jurisdiction to proceed as an
arbitrator, the court of appropriate jurisdiction can
b. He does not hold the necessary qualifications terminate the mandate of such person under Section
agreed upon by the parties. 14(2) of the act. The Supreme Court has held that
since ineligibility goes to the root of the appointment,
In Aravali Power Company Ltd. V. Era Infra Section 12(5), read with the Seventh Schedule,
Engineering Ltd,ii the Supreme Court held that “the clarifies that if the arbitrator falls under any of the
employee named as the arbitrator in the arbitration categories specified in the Seventh Schedule, he or
clause should be given effect to in the absence of any she becomes ineligible to act as an arbitrator.
justifiable apprehension of Independence and
Impartiality.” However, appointment of employee as 2.4. MANDATE OF THE ARBITRATOR:
an arbitrator is not valid and unenforceable in
arbitration. The term mandate of the arbitrator means the
termination of the arbitrator. The, mandate of an
In Volestalpine Schienen GmBH v. Delhi Metro Rail arbitrator shall terminate if-
Corporation Ltd.,iiithe Supreme Court held that “the
fact that the proposed arbitrators being government • He legally or factually is not capable to
employees / ex-government employees was not discharge his functions or fails to act without
sufficient in itself to make them ineligible to act as undue delay due to some other reasons; and
arbitrators, especially since they were ex-employees
of public bodies not related to the respondent.” • The parties agree to terminate him or he
himself withdraws from his office.
In the very recent case Corporation (Marcus Oil and
Chemical Division) v GAIL (India),iv Supreme Court Kifayatullah Haji Gulam Rasool Vs Bilkish Ismail
set out the legal position regarding challenges to a Mehsania,v there was a mandate given to the
person's possible appointment as an arbitrator. The arbitrator that he should complete the arbitration
position under the act is that a disclosure must be proceedings till 9.1.1999, in the consent order dated

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9.11.1998, subject to the agreement between the Competence’ which confers jurisdiction on
parties. The consent order contained an agreement Arbitrators to decide challenges to the arbitration
between the parties that the authority of the clause itself. In S.P.B. and Co. V. Patel Engineering Ltd.
and Another,vii the Supreme Court has held that
arbitrator shall come to an end on 9.1.1999. “where the Arbitral Tribunal was constituted by the
Subsequently, there was failure on the part of the parties without judicial intervention, the Arbitral
arbitrator to act without undue delay and there was Tribunal could determine all jurisdictional issues by
expiry of the time period. It was held that the exercising its powers of competence-competence
mandate of the arbitral tribunal had stood under the section 16 of the Act.”
terminated on 9.1.1999 by efflux of time.
2.6. CONCLUSION
In NBCC Ltd. V. J.G. Engineering Pvt. Ltd.vi the
Supreme Court has laid down the mandate of the This module covers the detailed aspects of
arbitrator expires in case of award is not delivered International Commercial Arbitration. It simply is a
within the limit stipulated by the parties in the dispute resolving mechanism between two parties
arbitration agreement. from two different countries. The process starts with
the issue of notice by the party seeking arbitration
2.5. CHALLENGE TO JURISDICTION: that is also dealt under Section 21 of the Arbitration
and Conciliation Act, 1996 followed by entering into
There is a need to understand that what could be the an agreement wherein the parties decide the manner
challenge faced by the Arbitral Tribunal related to its in which the process will continue to circumvent any
jurisdiction, it includes the questions like the decision conflict. The parties can also seek interim relief under
made by the Arbitral Tribunal would be binding on section 9 and 17 of the act. The parties also have the
the regular courts or not. Also, whether the decision right to either opt for ad hoc arbitrator or
given by arbitral courts works as precedents for institutional arbitrator. Appointment of arbitrator
future litigation or not, etc. As per the Section 16of can also be challenged on the grounds of
the Act- An Arbitral Tribunal has competence to rule independence and impartiality. Thus the act has
on its own Jurisdiction, which includes ruling on any sufficiently incorporated all the provisions which may
objections with respect to the existence or validity of fulfill the requirements of the parties.
the arbitration agreement. As per the ‘Doctrine of

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i (2008) 14 SCC 271. v AIR 2000 BOM 424.
ii 2017 (5) Arb. LR 226. vi (2010) 2 SCC 385.
iii 2017 4 SCC 665. vii 2005 (8) SCC 618.
iv 2017 SCC Online SC 1024.

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