Seat versus the Place of Arbitration

Author: Asif Iqbal, Centre for Juridical Studies, Dibrugarh University, Content Writer.

The preamble of the Arbitration Act 1996 mentions the adoption through the United Nations Commissions on International Trade Law (UNCITRAL) on International Commercial Arbitration in 1985. The United Nations asked the member countries to provide recommendations over the changes in the Model Law to have desirability containing a uniform law for conciliation and arbitral procedures. They established the rules to have settled those disputes which arise between international countries and maintain cordial relation at the end as countries were trying to come out from the losses which were suffered because of World Wars and Cold War; which happened between members of the Soviet Union and supporters of the United States of America. The parliament of India could enact this model law in the Forty-Seventh year of being Republican.

They referred the Act passed in the Parliament to as the Arbitration and Conciliation Act 1996 which extends within the territory of India. The word Arbitration means to hear and determine dispute arose between parties by a person or someone selected as per the unanimous decision between parties. An English bench gave a wide definition of Arbitration in Collins vs. Collins 1858 28 LJ Ch 184: 53 ER 916 which read as follows; ”An arbitration is a reference to the decisions of one or more persons either with or without an umpire, a particular matter in difference between the parties”. The arbitration is voluntary where the issue aroused amongst parties can be settled or judged by the bench of a Court. There are several manners through which arbitration can be resolved without the intervention of the judicial process;

  1. Negotiation

  2. Mediation

  3. Conciliation

  4. Arbitration

  5. Mini- trial

International Commercial Arbitration defined in section 2(f) highlights the dispute aroused through the legal relationship, whether contractual or not, which is commercial in nature within the ambit of the rule of law. The parties in the agreement have to be national or resident of India, the body of enterprise raised within the territory of India, Central management of an association and exercises within the territory of India.

The Chapter- V of the Conduct of Arbitral Proceedings adds about the treatment of parties in an equal as per section 18 of the Arbitration and Conciliation Act 1996, where the opportunity shall be provided to present the case in an unbiased manner. Section 20 of the discussed Act allows parties to decide the place of arbitration to parties with no coercion imposed upon them by the arbitrator appointed for the negotiation of issue. If the parties cannot fulfil the consideration provided in the agreement will impose responsibility upon the tribunal to decide the place of arbitration; shall be based upon the convenience of parties. The tribunal can also decide the place for arbitration; the place of arbitration is good for consultation amongst members, permitting members to hear the opposite parties, an inspection of documents, goods or other necessary properties.

The Supreme Court of India on September 25, 2018, gave judgment on a case was between the Union of India against Hardy Exploration & Production or Union of India vs. Hardy Exploration & Production, Civil Appeal no. 4628 of 2018. The decision on the Seat versus a place of Arbitration was decided by the division bench of the High Court of Delhi in 2016 which decided to dismiss the appeal preferred by the Union of India. The appeal was against the decision which was made by the arbitrator for the recourse against the arbitral award which is provided under section 34 of the Arbitration and Conciliation Act 1996. The Section mentions arbitral award may be set aside by the Court; where either of the parties was under an incapacity if the agreement for arbitration isn’t valid, the party which has made the application hasn’t made received notice for the appointment of the arbitrator if the matter is beyond the scope of arbitration, composition which has been established for the arbitration in tribunal and procedure was not following the agreement which was agreed by the parties. The Court finds the subject-matter was not in accordance to provide a settlement for arbitration under the law, the award which was made by the arbitrator to either of parties induced through force, corruption or violation of Section 75 or Section 81. The fundamental policy of the law in India was contravened and the decision for arbitration is against the morality coincides with the justice notions.

Apart from the International Commercial Arbitration can be set aside by the Court, if the decision made by the tribunal is vitiated by the patent illegality which has been found by the court in the investigation. The application for arbitration cannot be set aside for more than three months from the date of receiving the arbitral award. The application is disposed by the tribunal expeditiously within a period of a year from the date of notice which was served to another party for negotiation.

The Bench which was headed by then the Chief Justice of India, Dipak Misra opined the contractual clause between the parties to the contract stipulating Kuala Lumpur as the ‘venue’ of arbitration did not amount to a choice of juridical seat between the parties. The decision which was made by this bench gave clarity over the issue upon Seat versus venue for arbitration amongst parties. There was a product sharing contract which entered between the Government of India with the Hardy Exploration and Production for extraction, development and production of Hydrocarbons in a geographic block in India. The matter of arbitration was referred to be Kuala Lampur which was in favour of Hardy Exploration and Production.

To understand the place of arbitration has to be read with Section 20(2) along with Section 2(2) of the Arbitration and Conciliation Act 1996.

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