Domestic and International Alternative Dispute Resolution

The Arbitration and Conciliation Act, 1996 is built on two divisions which are easily confused. The first is between arbitration seated in India, governed by Part I, and the enforcement of foreign awards, governed by Part II. The second is between purely domestic arbitration and international commercial arbitration as defined in Section 2(1)(f), which turns on the nationality or residence of a party and not on the place of the arbitration. An international commercial arbitration may be seated in India, in which case Part I applies to it with certain differences; an arbitration between two Indian parties may be seated abroad, and the resulting award falls to be enforced under Part II.

1. The Two Divisions

The seat decides which Part applies; the parties decide whether the arbitration is international commercial

Section 2(1)(f), Arbitration and Conciliation Act, 1996 — international commercial arbitration

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 an individual who is a national of, or habitually resident in, any country other than India; or a body corporate which is incorporated in any country other than India; or an association or body of individuals whose central management and control is exercised in any country other than India; or the Government of a foreign country.

Section 2(2) provides that Part I applies where the place of arbitration is in India. The proviso, inserted in 2015, applies Sections 9, 27 and clause (a) of sub-section (1) and sub-section (3) of Section 37 to an international commercial arbitration even where the place of arbitration is outside India, unless the parties have agreed to the contrary, so that a party to a foreign seated arbitration may obtain interim relief from an Indian court in aid of assets situated here.

2. The Significance of the Seat

The seat is the juridical home of the arbitration. It determines the law governing the arbitration itself, the courts having supervisory jurisdiction, and the forum in which the award may be set aside. The venue is only the place where hearings are held, and may differ from the seat without any legal consequence. Indian law reached this position through the decisions holding that Part I does not apply to arbitrations seated outside India, and the 1996 Act was amended in 2015 to reflect it. The practical rule for drafting is to name the seat expressly; where a clause names only a venue and no contrary indication appears, the venue is ordinarily treated as the seat.

⚠ Two Indian parties choosing a foreign seat

The question whether two Indian parties may agree to a seat outside India has been contested. The better view, and the one now generally accepted, is that they may, on the footing that party autonomy permits it and that the resulting award is a foreign award enforceable under Part II. The consequences are significant: Part I does not apply, so the award cannot be set aside in India under Section 34, and the only resistance available here is at the enforcement stage under Section 48. Where the underlying contract has no foreign element, the choice may also raise a question under Section 28 of the Indian Contract Act, 1872, which is why the point is best settled expressly rather than left to implication.

3. Differences in the Applicable Rules

Question	Domestic arbitration in India	International commercial arbitration
Appointment by the court	Section 11: application to the High Court or its designated institution	Section 11: application to the Supreme Court or the institution designated by it
Substantive law	Indian law; the tribunal decides in accordance with it	Section 28(1)(b): the law chosen by the parties, and failing choice the law the tribunal considers appropriate
Patent illegality	Available as a ground under Section 34(2A) for a purely domestic award	Expressly not available; the proviso to Section 34(2A) excludes it
Time limit for the award	Section 29A: twelve months from completion of pleadings, extendable by six months by consent	Section 29A(1) proviso: the tribunal is to endeavour to make the award within twelve months, which is not a binding limit
Fast track procedure	Section 29B available	Available where the parties agree
Costs	Section 31A applies	Section 31A applies

4. Enforcement of Foreign Awards

Part II gives effect to two treaties. Chapter I covers awards made in the territory of a State notified by the Central Government as a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958, to which India acceded in 1960 with the reciprocity and commercial reservations. Chapter II preserves the Geneva Convention regime of 1927 for the small number of awards still governed by it. A foreign award, once found enforceable, is deemed to be a decree of the court under Section 49, and there is no intermediate proceeding to convert it.

Section 48 states the grounds on which enforcement may be refused, and they correspond to Article V of the Convention: incapacity of a party or invalidity of the agreement under the law to which the parties subjected it; want of proper notice or inability to present the case; the award dealing with matters beyond the scope of the submission; irregularity in the composition of the tribunal or in the procedure; the award not having become binding, or having been set aside or suspended by a competent authority of the country in which it was made; the subject matter not being capable of settlement by arbitration under Indian law; and enforcement being contrary to the public policy of India. The Explanations inserted in 2015 confine public policy to fraud or corruption, contravention of the fundamental policy of Indian law and conflict with the most basic notions of morality or justice, and make clear that the court does not review the merits.

📖 Shri Lal Mahal Ltd. v. Progetto Grano SpA, (2014) 2 SCC 433

Held: The expression public policy of India in Section 48(2)(b) is narrower than the same expression in Section 34. At the stage of enforcement of a foreign award the court does not have the power to review the award on the merits, and an error of law or of fact by the tribunal is not a ground for refusing enforcement.

Significance: The decision established that a foreign award receives a more limited examination in India than a domestic award, which is the position the 2015 amendments subsequently reinforced in the statutory text.

5. International Mediation

The position in mediation is less developed. Section 3 of the Mediation Act, 2023 applies the Act where the mediation is conducted in India and all or both parties habitually reside in or are incorporated in or have their place of business in India, or where the mediation agreement provides that any dispute shall be resolved under the Act, and it applies to international mediation conducted in India. A settlement produced by such a mediation is enforceable under Section 27 as a decree. What is missing is the reverse: India signed the United Nations Convention on International Settlement Agreements Resulting from Mediation, the Singapore Convention, on 7 August 2019, the day it opened for signature, but has not ratified it, so a settlement agreement produced by a mediation conducted abroad is not enforceable here by force of the Convention and must be sued upon as a contract.

6. Why the Distinctions Matter in Practice

Choice of forum for supervision. The seat fixes the court that will hear a challenge to the award, and parties choose seats for the quality and speed of that court as much as for convenience.
Scope of challenge. An award seated in India faces Section 34, including patent illegality if the arbitration is purely domestic; a foreign award faces only the narrow grounds in Section 48 at the enforcement stage.
Interim relief over Indian assets. The proviso to Section 2(2) preserves Section 9 for foreign seated international commercial arbitrations unless excluded, which is a point to consider before excluding it in the contract.
Institutional choice. In cross-border matters the institution is chosen partly for the neutrality it signals; the India International Arbitration Centre and the Mumbai Centre for International Arbitration were established with that purpose in view.
Enforcement reach. An arbitral award travels under the New York Convention; a mediated settlement does not yet travel from India, which is the principal reason international contracts still use arbitration as the final tier.

7. Related Topics and Provisions

Topic or provision	Connection
Institutional ADR vs Ad Hoc ADR	The administration of cross-border references
ADR in Commercial and Corporate Disputes	Drafting of clauses and the commercial framework
Sections 2(1)(f), 2(2), 11, 28, 29A and 34, A&C Act, 1996	The domestic and international divisions within Part I
Sections 44 to 52, A&C Act, 1996	Enforcement of New York Convention awards
New York Convention, 1958	The treaty basis of cross-border enforcement
Singapore Convention on Mediation, 2019	Signed by India in 2019 and not yet ratified