Bridging The Gap: Enhancing The Reach Of Interim Foreign Arbitration Awards

The current enforcement landscape for interim awards in India is characterized by two distinct scenarios:

1. The first scenario involves interim measures granted by Indian courts under Section 9 of the Arbitration and Conciliation Act, 1996 ("Arbitration Act") ("Scenario No. 1"). This provision allows Indian courts to provide interim relief in support of arbitration proceedings, irrespective of whether the arbitration is seated in India or abroad.
2. The second scenario pertains to interim measures granted by a foreign-seated arbitral tribunal or emergency arbitrator ("Scenario No. 2"). The recognition and enforcement of such measures in India remain contentious, raising questions about the extent to which Indian courts are willing to uphold interim awards issued by foreign-seated arbitral tribunals.

The issue of enforcement of such interim awards issued by foreign-seated arbitral tribunals has persisted for a considerable period, reflecting the intricate interplay between domestic and international arbitration frameworks.

The enforcement of interim awards, as envisaged in the first scenario, has evolved over time through rigorous judicial scrutiny.² After the Supreme Court's judgement in Bharat Aluminium v. Kaiser Aluminium³ ("BALCO"), the Government of India, in order to improve the ease of doing business index as well as to overall streamline the arbitration scenario, came up with the Arbitration and Conciliation (Amendment) Act, 2015, ("2015 Amendment"). The substance of the 2015 Amendment can be traced back to the 246^th Law Commission Report of 2014 ("Law Commission Report") which proposed amendments addressing the enforcement of domestic interim awards and the authority of tribunals to grant such awards, among other issues. While BALCO reduced judicial intervention in foreign arbitrations, the Law Commission Report identified a critical enforcement gap for interim arbitral awards issued by domestic arbitral tribunals.

In order to rectify this gap, the Commission astutely acknowledged the authority of an Arbitral Tribunal (domestic) to mandate interim measures of protection. The Law Commission Report underscored the compromised efficacy of Section 17 of the Arbitration Act, which pertains to interim measures ordered by Arbitral Tribunal, given the lack of any suitable statutory mechanism for the enforcement of such domestic interim orders.⁴ In light of this, the Commission recommended providing teeth to the interim orders of the arbitral tribunal and bring it at par with orders of the court under Section 9 of the Arbitration Act. Consequently, Section 17 of the Arbitration Act was amended to incorporate Section 17(2), rendering interim orders by Arbitral Tribunals enforceable as Court Orders under the Arbitration Act.

However, despite these developments, a significant gap remains in the enforcement of interim measures granted by foreign-seated arbitral tribunals or emergency arbitrators, as envisaged in Scenario No. 2. This paper aims to delve into this gap by firstly, examining the loopholes in the current enforcement mechanisms, secondly, exploring the necessity of adopting an "internationalist approach," and finally, proposing actionable steps towards establishing a pro-arbitration jurisdiction. The paper aims to comprehensively analyse and contribute to the ongoing discourse on enhancing the efficacy and reliability of enforcement of interim foreign arbitration awards.

1. Analysis of Legislative Gaps and Deficiencies:

1. Interim Awards issued by Indian-seated arbitral tribunals v. Foreign seated arbitral Tribunals

The Arbitration Act delineates a notable disparity between interim orders issued by India-seated arbitral tribunals and those issued by foreign-seated arbitral tribunals. While the former benefits from a direct enforcement mechanism envisaged under Section 17(2) of the Arbitration Act, the Act conspicuously lacks a corresponding enforcement mechanism for the latter, thereby leading to a significant procedural lacuna. The Hon'ble Delhi High Court in the case of Raffles Design International v. Educomp Professional Education⁵acknowledged such a distinction and stated as follows:

The said fact was also acknowledged by the Calcutta High Court in Uphealth Holdings Inc v. Glocal Healthcare Systems Pvt. Ltd⁶ where the Court, yet again, remarked that there is no pari materia provision under Part II of the Arbitration Act similar to section 17(2) of the Arbitration Act. The Court further held that an order of an emergency arbitrator can only be treated as an additional factor under Section 9 of the Arbitration Act but is not directly enforceable.

It is noteworthy that while amending Section 17(2) of the Arbitration Act, the Law Commission Report sought to align its views with Article 17 of the UNCITRAL Model Law which dealt with the power of arbitral tribunal to order interim measures. However, in doing so, it seem to have overlooked that the UNCITRAL Model law explicitly recognizes orders issued by arbitral tribunals, irrespective of the country in which they are issued, thereby empowering interim orders from foreign arbitral tribunals as well. Although the Law Commission Report sought to judiciously identify the enforcement gaps for domestic interim awards, it left unanswered the mechanism for enforcing interim orders from foreign tribunals. Addressing this gap, as recognized by various judicial pronouncements discussed hereinabove, is imperative to enhance the efficacy of arbitration as a dispute resolution mechanism and to safeguard the interests of judgement-creditors throughout the process.

2. Challenges in enforcing foreign interim awards

The aforesaid discussion brings us to the core issue, which the paper seeks to address i.e., the conspicuous gap existing in the enforcement of interim foreign awards passed by foreign arbitral tribunals. The issue is glaring in as much as there have been a slew of unwarranted precedents⁷ from across the Courts in India showing resistance in enforcing and / or accepting the orders passed by foreign arbitral tribunals. While foreign awards are directly enforceable under Part II of the Arbitration Act (which enforces the New York Convention in India), interim orders issued by foreign-seated tribunals in support of such final awards lack enforceability.

The Supreme Court has been cognizant of such situations and has approached such matters with a progressive stance. In August 2021, the Hon'ble Supreme Court in Amazon.com NV Investment v. Future Retail Limited and Ors.⁸ ("Amazon v. Future") held that an emergency award rendered in an arbitration seated in India is enforceable as an interim order of an arbitral tribunal under Section 17(1) of the Arbitration Act. The Court further determined that such an award, when enforced under Section 17(2), is not subject to challenge under Section 37, the appeal provision of the Act. The reasoning provided by the Court takes into account the following:

1. the efficacy of the arbitral process and the availability of a quick remedy through the emergency arbitration process,
2. the need to decongest courts and free them from the burdens of Section 9 petitions
3. that the conjoint of Section 17 with other provisions of the Arbitration Act, does not interdict the application of any other rules of the arbitral tribunals

The Hon'ble Supreme Court in the Amazon v. Future judgement has duly recognized India-seated emergency awards as interim orders under Section 17(1) of the Arbitration Act. However, a similar authoritative finding or a statutory clarification in relation to an interim / emergency award granted by a foreign seated arbitral tribunal is yet awaited.

This discussion raises some pertinent questions: Why is an interim order by a foreign-seated arbitral tribunal treated with such reservation that the applicability of Section 17 cannot be extended to it? Considering that the primary objective of emergency arbitrations and interim awards is to provide effective and quick remedies, what potential detriment could arise if this approach and rationale were equally applied to foreign-seated arbitral tribunals?

3. Speculative litigations by award debtors

Due to lack of a proper enforcement mechanism and existence of such disparity, award debtors take advantage of these loopholes to resort to speculative litigation as a strategy to delay or obstruct the process. The Hon'ble Supreme Court in the judgement of Vijay Karia v. Prysmian Cavi E. Sistemi SRL⁹rightly remarked that the award debtors were indulging in "speculative litigation with the fond hope that by flinging mud on a foreign arbitral award, some of the mud so flung would stick." Similar view has also been taken by the German Supreme Court in Shipowner (Netherlands) v Cattle and Meat Dealer(Germany)¹⁰wherein the court opined that any objection / issue must first be raised in the Country of origin of the Award and only if the objection was rejected or was impossible to raise, could it be raised at the time of enforcement. This practice of raising delayed objections is particularly concerning with respect to enforcement of foreign interim awards issued by foreign seated arbitral tribunals. Judgment creditors, compelled to seek enforcement under Section 9 of the Arbitration Act, find themselves vulnerable to objections raised by award debtors under Section 48. This tactic effectively traps judgment creditors in a perpetual cycle of litigation, rendering the concept of an 'interim award' meaningless. Such procedural entanglements not only delay justice but also diminish the efficacy of arbitration as a swift and decisive dispute resolution mechanism.

In another recent judgement of the Hon'ble Supreme Court in Avitel Post Studioz Limited and Ors. v. HSBC PI Holdings (Mauritius) Limited,¹¹ ("Avitel") the Court dealt with a situation wherein the award debtors wrongfully challenged the appointment of the Arbitrators on the grounds of "bias" at the time of enforcement. The Court while dealing with the merits remarked as follows:

To reiterate, the recent practices, exemplified by the case of Anupam Mittal v. Westbridge Ventures II Investment Holdings¹², undermine the pro-arbitration and foreign investment-friendly regime that India aims to foster. Such judicial interventions, which tend to impede arbitration proceedings, are counterproductive and pose significant challenges to the confidence of foreign investors. Anticipating these potential hurdles in dispute resolution under the Indian legal framework could deter foreign investments, thereby impacting India's attractiveness as a destination for international business.

2. Adopting an Internationalist Approach to enhance enforceability

Being a signatory to the New York Convention ("Convention"), what is required is to adopt an internationalist approach while dealing with foreign awards.¹³ The UNCITRAL Rules, which underpin the Indian Arbitration Act, offer sufficient room under Article 17H for the enforcement of interim awards issued by tribunals seated in foreign jurisdictions. The Article reads as follows:

Importantly, such practice is also in line with the other pro-arbitration jurisdictions such as Hong Kong,¹⁴ Singapore¹⁵, the United Kingdom¹⁶ and New Zealand,¹⁷ to name a few. The Hon'ble Supreme Court, in PASL Wind Solutions Private Limited v. GE Power Conversion India Private Limited¹⁸, exemplified this internationalist approach by rejecting the notion that Indian parties designating a foreign seat for arbitration contravenes public policy. The Court affirmed that the Arbitration Act does not prevent Indian parties from choosing a foreign seat, emphasizing party autonomy and freedom of contract. This decision has significant implications. It encourages Indian subsidiaries to opt for arbitration in their parent company's jurisdiction, facilitating the enforcement of interim orders concerning the assets of such subsidiaries in India.

Without the required flexibility to enforce these interim awards granted by foreign-seated tribunals, Section 9 Courts will face increased congestion. This is counter to the 2015 Amendment read with the Law Commission Report, which aimed to streamline the arbitration process and reduce the burden on the Section 9 Courts.

3. Parting Thoughts

The enforcement of foreign arbitral awards in India has undergone significant evolution over the years. From the advent of Arbitration and Conciliation Act, 1899 till the present statute i.e. the Arbitration Act, 1996, the Indian jurisprudence over the years have aimed to streamline the enforcement process and align it with international standards. Judgements have sought to underscore that minimal judicial intervention to a foreign award is the norm and interference can only be based on the exhaustive grounds mentioned under Section 48.¹⁹ Therefore, it can be seen that excessive formalism must be avoided when dealing with enforcement of foreign awards. Fali Nariman and Marike Paulsson have indeed argued against excessive formalism in the enforcement of arbitral awards.²⁰ They emphasize that rigid adherence to formal requirements can undermine the efficiency and effectiveness of arbitration as a dispute resolution mechanism. This perspective was also supported in the landmark decision of the High Court of Bombay in GEC v. Renusagar²¹, where the court took a pragmatic approach to enforcement, focusing on the substance rather than the form. This highlights an approach that respects party autonomy and minimizes unnecessary intervention when an arbitral award is enforceable, thereby giving some finality to the decisions undertaken by foreign tribunals. Hence, what is required is either an authoritative finding on the said conundrum or a legislative amendment introducing an enforcement mechanism for interim orders passed by foreign seated tribunals. The following recommendations are provided for consideration:

1. To have an enforcement mechanism in terms of Article 17H of the UNCITRAL Rules (Model Law) for the purposes of enforcement of interim awards passed by foreign seated arbitral tribunals.
2. Alternatively, the Arbitration Act should be revised to extend the application of Section 17(2) to interim awards in foreign-seated arbitrations, which would negate the need for Section 9(1) compliance under the Arbitration Act, in such cases. Consequently, to encompass 'interim awards', the definition of foreign award in Section 44 of the Arbitration Act should also be revised or clarified.

Through this paper, we have tried to highlight the existing issues in the enforcement mechanism with respect to interim awards issued by foreign seated tribunals. These issues require urgent consideration in order to make India a pro-arbitration nation in the eyes of foreign investors. While a faltering and outdated system can cripple the entire dispute resolution mechanism, an effective mechanism not only instills investor confidence but also propels economic growth. The Amazon v. Future and Avitel judgments illustrate a pivotal shift in Indian jurisprudence towards a pro-arbitration stance. Indian Courts are now signaling their commitment to enforcing foreign awards unless a clear violation of morality and justice is evident. For any investor planning to invest in India, the efficacy and feasibility of commercial dispute resolution are paramount. Hence, it is important that the aforementioned recommendations are taken into consideration to transform India into a pro-enforcement jurisdiction by bridging the gap between "recognition" and "enforcement" of foreign-seated tribunals awards.

Footnotes

1 Referred by the Hon'ble Supreme Court in Avitel Post Studioz Limited and Ors. v. HSBC PI Holdings (Mauritius) Limited, 2024 SCC Online SC 345.

2 (a)The Supreme Court's judgement in Bhatia International v. Bulk Trading S.A. and Anr., (2002) 4 SCC 105 ("Bhatia International") wherein it clarified that the provisions of Part I would apply even to foreign seated Arbitrations, unless the parties agreed to otherwise. (b) The Supreme Court's judgement in Bharat Aluminium v. Kaiser Aluminium, (2012) 9 SCC 552 ("BALCO") where it overruled Bhatia International judgement and held that Indian Courts cannot intervene in case of Arbitrations seated outside India.

3 (2012) 9 SCC 552.

4 Law Commission of India, Amendments to the Arbitration and Conciliation Act (Law Com No 246, 2014).

5 2016 SCC Online Del 5521.

6 2023 SCC OnLine Cal 2442

7 Anupam Mittal v. Westbridge Ventures II Investment Holdings, [2023] SGCA 1; Sundaram Finance Ltd v. NEPC India Ltd., (1999) 2 SCC 479; M.D. Army Welfare Housing Organisation v. Sumangal Services Pvt. Ltd., (2004) 9 SCC 619.

8 (2002) 1 SCC 209.

9 (2020) 11 SCC 1.

10 Dutch Shipowner v. German Cattle and Meat Dealer, Bundesgerichtshof, Germany, 1 February 2001, XXIX Y.B.Com. Arb. 700 (2004)

11 2024 SCC Online SC 345.

12 [2023] SGCA 1.

13 Fali Nariman and others, 'The India Resolutions for the 1958 Convention on the Recognition and Enforcement of Foreign Awards' in Dushyant Dave and others(ed) Arbitration in India (Kluwer 2021).

14 HK-e-Legislation, Cap. 609 Arbitration Ordinance (https://www.elegislation.gov.hk/hk/cap609) accessed on 06.08.2024.

15 Government Gazette Acts Supplement (International Arbitration Act 1994 - Singapore Statutes Online (agc.gov.sg) accessed on 06.08.2024.

16 Arbitration Act, 1996 (Arbitration Act 1996 (legislation.gov.uk) accessed on 06.08.2024.

17 Arbitration Act, 1996 No. 99 (Arbitration Act 1996 No 99 (as at 30 January 2021), Public Act Contents – New Zealand Legislation) accessed on 06.08.2024.

18 (2021) 7 SCC 1.

19 Union of India v. Vedanta, (2020) 10 SCC 1.

20 Report and the India Resolutions for the 1958 Convention on the Recognition and Enforcement of Foreign Awards by Fali Nariman and Marike Paulsson; available at, (https://www.arbitration-icca.org/media/7/92930493591493/indiaresolutions16formatted.pdf) accessed on 06.08.2024.

21 1989 SCC OnLine Bom 241.

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