Arbitration and Conciliation Act, 1996
International Commercial Arbitration
An arbitration is international commercial within Section 2(1)(f) when the relationship is commercial and at least one party is foreign. The test is the identity of the parties and not the place of the arbitration, so an international commercial arbitration may be seated in India and governed by Part I, while an arbitration between two Indian parties may be seated abroad and produce a foreign award enforced under Part II. Around that definition lie the questions that make this branch of the subject: the seat, the several laws that may govern one reference, the availability of Indian interim relief where the seat is abroad, and the choice of institution.
The questions in order, and the position where two Indian parties choose a foreign seat
1. The Definition
Section 2(1)(f), Arbitration and Conciliation Act, 1996 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 (i) an individual who is a national of, or habitually resident in, any country other than India; or (ii) a body corporate which is incorporated in any country other than India; or (iii) an association or a body of individuals whose central management and control is exercised in any country other than India; or (iv) the Government of a foreign country. |
Two elements must both be present: the relationship must be commercial under Indian law, which is construed widely to cover the ordinary transactions of trade, and one party must fall within one of the four sub-clauses. The third sub-clause, on central management and control, does not apply to a company incorporated in India, because the second sub-clause makes incorporation the test for bodies corporate. Two Indian companies therefore arbitrate as a domestic arbitration however their shareholding or control is arranged.
Basis | Domestic arbitration | International commercial arbitration |
|---|---|---|
Test | Both parties Indian and the place of arbitration in India | At least one party foreign within Section 2(1)(f) |
Court | Principal civil court of original jurisdiction, or the High Court in its ordinary original civil jurisdiction | The High Court alone |
Appointment under Section 11 | The High Court or an institution designated by it | The Supreme Court or an institution designated by it |
Substantive law | Indian law, by force of Section 28(1)(a) | The rules of law designated by the parties, Section 28(1)(b) |
Patent illegality | Available under Section 34(2A) | Expressly excluded by the proviso |
Time limit for the award | Twelve months from completion of pleadings, Section 29A(1) | The tribunal is to endeavour to decide within twelve months; the limit is not binding |
2. The Seat, and the Several Laws
The seat is the juridical home of the arbitration. It determines the curial law, the court with supervisory jurisdiction and the forum in which the award may be set aside; the venue is merely where hearings are held. Section 2(2) applies Part I where the place of arbitration is in India, and Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 established the territorial principle: Part I does not apply to an arbitration seated outside India.
- The proper law of the contract governs the substance of the dispute and is the subject of Section 28.
- The law of the arbitration agreement governs the validity, scope and effect of the clause, including who is bound by it. It is rarely specified, and is ordinarily inferred from the proper law of the contract or from the law of the seat.
- The curial law, or lex arbitri, governs the conduct of the reference and the supervisory jurisdiction, and follows the seat.
- The law of the place of enforcement governs execution and supplies the public policy that may defeat the award.
These may all differ in a single case: a contract governed by English law, an arbitration clause governed by Indian law, a seat in Singapore and enforcement in India. The classical Indian statement of the distinction is National Thermal Power Corporation v. The Singer Company, (1992) 3 SCC 551, and the practical lesson is that a clause should name the seat expressly rather than leaving it to be inferred from the venue.
3. Foreign Seated Arbitration Involving Indian Parties
📖 PASL Wind Solutions (P) Ltd. v. GE Power Conversion India (P) Ltd., (2021) 7 SCC 1 Held: Two companies incorporated in India may designate a seat of arbitration outside India. Party autonomy permits it, and nothing in Section 23 or Section 28 of the Indian Contract Act, 1872, or in Section 28(1)(a) of the Arbitration and Conciliation Act, 1996, stands in the way, because Part I does not apply to an arbitration seated abroad. The award made in such an arbitration is a foreign award within Section 44 and is enforceable under Part II. Interim relief under Section 9 is available to such parties, because the expression international commercial arbitration in the proviso to Section 2(2) refers to an arbitration seated outside India and is not governed by the definition in Section 2(1)(f). Significance: The decision resolved a conflict among the High Courts, and it is the authority both for the freedom of Indian parties to choose a foreign seat and for their access to Indian courts for interim protection when they do. |
⚠ What the choice of a foreign seat costs and gains The gain is a neutral forum and a supervisory court the parties consider reliable. The cost is that Part I does not apply: the award cannot be set aside in India under Section 34, the grounds of patent illegality and of a full public policy review are unavailable, and the only resistance in India is at the enforcement stage under Section 48, where the grounds are narrower still. A party that expects to be the award debtor gives up a great deal by agreeing to a foreign seat, and a party that expects to enforce gains correspondingly. |
Interim relief in a foreign seated arbitration follows the proviso to Section 2(2), inserted in 2015. Sections 9, 27, and Section 37(1)(a) and 37(3) apply to an international commercial arbitration even where the place of arbitration is outside India, unless the parties have agreed to the contrary. Two consequences are practical: the parties may exclude the proviso by agreement, and institutional rules or a carefully drafted clause sometimes do; and Section 17 has no application to a foreign seated arbitration, so an order of an emergency arbitrator appointed under foreign institutional rules is not enforceable in India under Section 17(2), and the remedy here is an application under Section 9.
4. Party Autonomy and Its Limits
Party autonomy is wider in international commercial arbitration than anywhere else in the Act. The parties choose the seat, the institution and its rules, the number of arbitrators and the method of appointment, the language, the procedure and the rules of law governing the substance. Section 11(9) permits a sole or third arbitrator of a nationality other than those of the parties, which is the usual arrangement where neutrality is in issue.
The limits are few but firm. Equal treatment under Section 18 cannot be contracted out of where the seat is in India. Ineligibility under Section 12(5) may be waived only by an express agreement in writing made after the dispute has arisen. Arbitrability is governed by the law of the seat and, at the enforcement stage, by Indian law under Section 48(2)(a). And however the substance is decided, an award whose enforcement would offend the public policy of India may be refused enforcement under Section 48(2)(b), though that ground is construed more narrowly for a foreign award than for a domestic one.
5. The Institutions
Institution | Seat and character | Features of note |
|---|---|---|
International Chamber of Commerce | Paris; the International Court of Arbitration administers references worldwide | Terms of Reference settled at the outset; scrutiny of the draft award by the Court before it is issued; emergency arbitrator and expedited procedure provisions; ad valorem fees |
Singapore International Arbitration Centre | Singapore; the institution most used by Indian parties for cross-border references | Expedited procedure for smaller claims; emergency arbitrator; a court and a seat widely regarded as arbitration-friendly |
London Court of International Arbitration | London; long-established, with a distinctive fee model | Fees charged on hourly rates rather than ad valorem; emergency arbitrator provisions; strong tradition of party-appointed tribunals |
India International Arbitration Centre | New Delhi; established by the New Delhi International Arbitration Centre Act, 2019 and declared an institution of national importance | Took over the undertaking of the former International Centre for Alternative Dispute Resolution; intended as India's flagship institution for international references |
Mumbai Centre for International Arbitration and others | Mumbai, Delhi and other cities; includes the Delhi International Arbitration Centre and the Indian Council of Arbitration | Domestic institutional capacity, with rules modelled on international practice |
The choice of institution is a choice of machinery rather than of law. It supplies the appointment procedure, the fee schedule, the secretariat and, in some systems, scrutiny of the award, and it avoids an application to court under Section 11 where a party refuses to cooperate. It does not change the seat, which must be stated separately, and it does not by itself confer on the tribunal any power the parties have not given, which is why an authorisation to decide ex aequo et bono must still be express.
6. Enforcement of the Award
Where the seat is in India, the award is a domestic award within Section 2(7), is challenged under Section 34 without the ground of patent illegality, and is enforced under Section 36. Where the seat is abroad, the award is a foreign award under Section 44 if it was made in the territory of a State notified by the Central Government as a party to the New York Convention and arises out of a relationship considered commercial under Indian law. It is enforced under Sections 47 to 49, and enforcement may be refused only on the grounds in Section 48, which correspond to Article V of the Convention. Once found enforceable, Section 49 deems it a decree of the court.
7. Related Topics and Provisions
Topic or provision | Connection |
|---|---|
Domestic ADR vs International ADR | Part I and Part II, and the consequences of the seat |
Rules Applicable to the Substance: Section 28 | Choice of law, renvoi and the four laws in an arbitration |
Definitions under Section 2 and Kinds of Arbitration | Section 2(1)(f), the seat and the venue |
Institutional ADR vs Ad Hoc ADR | What an institution supplies, and the choice between models |
Interim Relief in Arbitration: Sections 9 and 17 | The proviso to Section 2(2) and relief in a foreign seated reference |
Sections 44 to 49, A&C Act, 1996 | Enforcement of foreign awards under the New York Convention |