NEW YORK CONVENTION AWARD
Under The Arbitration and Conciliation Act, 1996
• Definition of New York Convention Award
○ What is a New York Convention Award?
A New York Convention Award is a foreign arbitral award governed by the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (commonly known as the New York Convention). This convention is one of the most successful international treaties, with over 170 signatory countries, facilitating the enforcement of international arbitration awards across borders.
In India, the New York Convention is implemented through Part II, Chapter I (Sections 44-52) of the Arbitration and Conciliation Act, 1996.
○ Legal Definition under Section 44
Section 44 of the Arbitration and Conciliation Act, 1996 defines a "foreign award" as:
"An arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960—"
- (a) In pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and
- (b) In one of such territories as the Central Government, being satisfied that reciprocal provisions have been made, may, by notification in the Official Gazette, declare to be territories to which the said Convention applies.
○ Essential Elements
- Commercial Nature: The dispute must be commercial under Indian law
- Written Arbitration Agreement: Must be in writing
- Convention Territory: Award made in a notified Convention country
- Post October 11, 1960: Award made after this date
- Reciprocity: Recognition based on reciprocal provisions
• Key Provisions of Part II, Chapter I (Sections 44-52)
○ Section 44: Definition
Defines what constitutes a "foreign award" under the New York Convention framework.
○ Section 45: Power of Judicial Authority to Refer Parties to Arbitration
When a judicial authority is seized of a matter covered by an arbitration agreement to which the New York Convention applies, it shall refer the parties to arbitration unless it finds that the arbitration agreement is null and void, inoperative, or incapable of being performed.
○ Section 46: When Foreign Award Binding
A foreign award shall be binding for all purposes on the persons as between whom it was made and may be relied upon by any of those persons by way of defense, set-off, or otherwise in any legal proceedings in India.
○ Section 47: Evidence
The party seeking enforcement must produce:
- (a) The original award or a duly authenticated copy
- (b) The original arbitration agreement or a duly certified copy
- (c) Evidence proving that the award has become binding on the parties
○ Section 48: Conditions for Enforcement of Foreign Awards
This is the most crucial section, outlining grounds for refusing enforcement of a foreign award. The court may refuse enforcement if the party against whom enforcement is sought proves certain grounds.
○ Section 49: Enforcement of Foreign Awards
A foreign award may be enforced in India as a decree of an Indian court under the provisions of the Code of Civil Procedure, 1908.
○ Section 50: Appealable Orders
An appeal shall lie from an order refusing to:
- Refer parties to arbitration (Section 45)
- Enforce a foreign award (Section 48)
Note: No appeal lies against an order enforcing a foreign award.
○ Section 51: Saving
Nothing in this Chapter shall prejudice any rights which any person would have had to enforce an arbitral award if this Chapter had not been enacted.
○ Section 52: Chapter I Not to Apply to Certain Awards
This Chapter shall not apply to arbitral awards made in the territory of India.
• Practical Examples of New York Convention Awards
○ Example 1: International Trade Dispute
Scenario: An Indian company (ABC Ltd.) enters into a contract with a US company (XYZ Corp.) for the supply of machinery. The contract contains an arbitration clause stating that disputes will be resolved through ICC arbitration seated in New York.
Dispute: A dispute arises regarding quality of machinery and payment terms. XYZ Corp. initiates arbitration in New York.
Award: The arbitral tribunal passes an award in favor of XYZ Corp., directing ABC Ltd. to pay USD 500,000.
Enforcement in India: XYZ Corp. can enforce this award in India under Part II, Chapter I of the Act, 1996, as:
- USA is a signatory to the New York Convention
- The dispute is commercial in nature
- There is a written arbitration agreement
- The award was made after October 11, 1960
○ Example 2: Joint Venture Dispute
Scenario: An Indian promoter and a UK company enter into a joint venture agreement to establish a manufacturing unit in India. The arbitration clause specifies London Court of International Arbitration (LCIA) as the dispute resolution forum.
Dispute: Disagreements arise over management control and profit distribution.
Award: LCIA tribunal passes an award in favor of the UK company.
Enforcement in India: The UK company can seek enforcement of this LCIA award in Indian courts under the New York Convention framework, as the UK is a Convention country and all conditions under Section 44 are satisfied.
○ Example 3: Investment Arbitration
Scenario: A foreign investor from Singapore invests in an Indian infrastructure project. The investment agreement contains an arbitration clause referring disputes to SIAC (Singapore International Arbitration Centre).
Dispute: The foreign investor alleges breach of investment protection commitments.
Award: SIAC tribunal awards compensation to the foreign investor.
Enforcement in India: This award qualifies as a New York Convention Award and can be enforced in India, subject to the grounds under Section 48.
• Landmark Case Law: Vijay Karia v. Prysmian Cavi E Sistemi SRL (2020)
○ Case Citation
Vijay Karia & Ors. v. Prysmian Cavi E Sistemi SRL & Ors.
Civil Appeal No. 1544-1545 of 2020
Supreme Court of India
Date of Judgment: February 13, 2020
Bench: Justice Rohinton F. Nariman, Justice V. Ramasubramanian, Justice Aniruddha Bose
○ Facts of the Case
- Parties: Vijay Karia and other shareholders (Appellants) entered into a Joint Venture Agreement (JVA) with Prysmian Cavi E Sistemi SRL, an Italian company (Respondent), along with Ravin Cables Ltd.
- Agreement: Prysmian acquired 51% shares in Ravin Cables Ltd. and paid consideration including a control premium.
- Dispute: Disputes arose regarding management control, breach of representations, and removal of the CEO.
- Arbitration: Dispute was referred to arbitration under LCIA Rules in London, governed by English law.
- Award: Three partial final awards and one final award were passed in favor of Prysmian, rejecting all counterclaims of the Karias.
- Challenge: The awards were not challenged in England. Prysmian sought enforcement in India under Section 47 of the Act.
- Opposition: Karias opposed enforcement under Section 48, arguing the awards violated Indian public policy and FEMA regulations.
○ Issues Before the Supreme Court
- Whether the foreign awards violated Indian public policy?
- Whether the appellants were unable to present their case before the arbitrator (Section 48(1)(b))?
- Whether contravention of FEMA regulations amounts to violation of fundamental policy of Indian law?
- What is the scope of judicial review while enforcing foreign awards?
○ Supreme Court's Observations and Holdings
1. Pro-Enforcement Bias of New York Convention
The Supreme Court emphasized that the New York Convention embodies a pro-enforcement bias. The grounds for refusing enforcement under Section 48 must be construed strictly and narrowly. The burden of proof lies on the party challenging enforcement.
2. Three Categories of Grounds under Section 48
The Court categorized the grounds under Section 48 into three groups:
- Category 1 - Jurisdictional Grounds (Mandatory): Grounds affecting the jurisdiction of arbitration proceedings. If proved, the court has no discretion and must refuse enforcement.
- Category 2 - Party Interest Grounds (Discretionary): Grounds affecting party interest alone. Court may exercise discretion to enforce the award if no prejudice is caused.
- Category 3 - Public Policy Grounds (Mandatory): Grounds relating to public policy of India. If proved, enforcement must be refused.
3. Limited Scope of "Public Policy of India"
The Court clarified the meaning of "public policy of India" under Section 48(2)(b):
- Enforcement can be refused only if the award is contrary to: (i) fundamental policy of Indian law, (ii) interests of India, or (iii) justice or morality
- Fundamental policy of Indian law means the core principles forming the bedrock of Indian legal system, not mere violation of statutory provisions
- The Court must not conduct a review on merits of the award
4. FEMA Violation Does Not Equal Public Policy Violation
The Court held that:
- Contravention of Foreign Exchange Management Act (FEMA) does not amount to violation of fundamental policy of Indian law
- FEMA is a regulatory statute for managing foreign exchange, not policing it (unlike its predecessor FERA)
- Transactions in violation of FEMA are not void and can be approved post-facto
- Therefore, awards directing transfer of shares at discounted value do not violate Indian public policy merely due to FEMA concerns
5. "One Bite of the Cherry" Principle
The Supreme Court reinforced that parties get "one bite of the cherry" - they cannot challenge the award on merits at the seat of arbitration and then re-litigate the same issues at the enforcement stage. The enforcement court must not become a court of appeal.
6. Award Must Be Read as a Whole
The Court held that a foreign arbitral award must be read as a whole, fairly, and without nitpicking. Poor reasoning in determining a material issue does not make the award contrary to public policy. Only if the award fails to determine material issues going to the root of the dispute or fails to decide a claim entirely would it offend basic notions of justice.
○ Judgment and Ratio Decidendi
The Supreme Court dismissed the appeals and upheld the Delhi High Court's order enforcing the LCIA awards. The Court also imposed heavy costs on the appellants to discourage frivolous challenges to enforcement of foreign awards.
Key Ratio:
- Foreign awards enjoy a pro-enforcement bias under the New York Convention
- Grounds under Section 48 must be construed strictly and narrowly
- Violation of FEMA does not amount to violation of public policy of India
- Enforcement court cannot review the award on merits
- Parties cannot re-litigate issues at enforcement stage that could have been raised at the seat of arbitration
○ Significance of the Judgment
- Reinforced Pro-Arbitration Policy: The judgment strengthens India's commitment to honoring international arbitration awards
- Clarified Public Policy Defense: Narrowed the scope of "public policy" defense, preventing its misuse
- Discouraged Frivolous Challenges: Imposition of costs sends a strong message against delaying tactics
- Enhanced Investor Confidence: Foreign investors have greater certainty about enforceability of awards in India
- Aligned with International Best Practices: Brought Indian jurisprudence in line with global arbitration standards
• Comparative Tables and Analysis
○ Table 1: Grounds for Refusing Enforcement under Section 48
| Ground | Section Reference | Description | Category | Discretionary? |
|---|---|---|---|---|
| Incapacity of Parties | Section 48(1)(a) | Party to arbitration agreement was under incapacity under applicable law | Jurisdictional | No (Mandatory Refusal) |
| Invalid Arbitration Agreement | Section 48(1)(a) | Arbitration agreement not valid under the law to which parties subjected it or under the law of the country where award was made | Jurisdictional | No (Mandatory Refusal) |
| Lack of Proper Notice | Section 48(1)(b) | Party was not given proper notice of appointment of arbitrator or of arbitral proceedings or was otherwise unable to present case | Party Interest | Yes (Discretionary) |
| Award Beyond Scope | Section 48(1)(c) | Award deals with dispute not contemplated by or not falling within terms of submission to arbitration | Jurisdictional | Partial (Only excess portion may be refused) |
| Improper Composition of Tribunal | Section 48(1)(d) | Composition of arbitral tribunal or arbitral procedure not in accordance with agreement of parties or law of country where arbitration took place | Jurisdictional | No (Mandatory Refusal) |
| Award Not Yet Binding | Section 48(1)(e) | Award has not yet become binding on parties or has been set aside or suspended by competent authority of country where award was made | Jurisdictional | No (Mandatory Refusal) |
| Non-Arbitrable Subject Matter | Section 48(2)(a) | Subject matter of difference is not capable of settlement by arbitration under Indian law | Public Policy | No (Mandatory Refusal) |
| Violation of Public Policy | Section 48(2)(b) | Enforcement would be contrary to public policy of India (including fundamental policy, interests of India, justice or morality) | Public Policy | No (Mandatory Refusal) |
○ Table 2: India's Reservations under New York Convention
| Reservation Type | Description | Impact on Enforcement |
|---|---|---|
| Reciprocity Reservation | India will enforce awards made only in territories of other Contracting States (Convention countries) | Awards from non-Convention countries cannot be enforced under Part II, Chapter I (only 48 notified territories as of now) |
| Commercial Reservation | India will apply the Convention only to disputes arising out of legal relationships, whether contractual or not, that are considered commercial under Indian law | Non-commercial disputes (e.g., family matters, criminal matters) are excluded from enforcement under New York Convention |
○ Table 3: Comparison - New York Convention vs Geneva Convention Awards
| Aspect | New York Convention (Part II, Ch I) | Geneva Convention (Part II, Ch II) |
|---|---|---|
| Applicable Convention | UN Convention on Recognition and Enforcement of Foreign Arbitral Awards, 1958 | Geneva Convention on Execution of Foreign Arbitral Awards, 1927 |
| Section Coverage | Sections 44-52 | Sections 53-60 |
| Effective Date | Awards made on or after October 11, 1960 | Awards made after July 28, 1924 |
| Number of Signatories | Over 170 countries (More widely adopted) | Limited to Geneva Protocol countries (Less common now) |
| Enforcement Mechanism | More streamlined and pro-enforcement | Older mechanism with procedural complexities |
| Practical Usage | Most commonly used for international awards | Rarely used in modern practice |
○ Table 4: Key Amendments to the Act Affecting Foreign Awards
| Year | Amendment Act | Key Changes Related to Foreign Awards |
|---|---|---|
| 1996 | Original Act | Consolidated law for domestic and foreign arbitration; implemented New York Convention through Part II |
| 2015 | Arbitration and Conciliation (Amendment) Act, 2015 | Narrowed definition of "public policy of India"; removed "patent illegality" as ground for challenging international commercial arbitration awards; introduced time limits for arbitration proceedings |
| 2019 | Arbitration and Conciliation (Amendment) Act, 2019 | Established Arbitration Council of India; graded arbitral institutions; streamlined appointment of arbitrators |
| 2021 | Arbitration and Conciliation (Amendment) Act, 2021 | Clarified automatic stay of enforcement pending challenge applies only to court awards, not arbitral awards; further pro-enforcement measures |
• Enforcement Process Flowchart
○ Step-by-Step Enforcement Process of New York Convention Award in India
Foreign Arbitral Award Obtained
• Made in Convention country?
• Commercial in nature?
• After October 11, 1960?
• Written arbitration agreement?
New York Convention
(May try other routes)
Under Section 47:
• Original award or certified copy
• Original arbitration agreement or certified copy
• Evidence that award is binding
• Certified translation (if needed)
File application in appropriate court:
• High Court having jurisdiction
• District Court (as per pecuniary limits)
Under Order XXXVII, CPC
Court issues notice to party
against whom enforcement is sought
Award enforced as decree
under Section 49
Under Section 48:
• Grounds under Section 48(1)(a)-(e)
• Grounds under Section 48(2)(a)-(b)
Burden of proof on award debtor
• Limited scope of review
• No review on merits
• Strict construction of Section 48
• Pro-enforcement bias
Award debtor wins
Award holder may appeal
under Section 50
Court passes order under Section 49
Award enforced as decree under CPC
Limited grounds for appeal
Supreme Court: Special Leave Petition
Award executed as court decree
Recovery proceedings initiated