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Seat-and-Venue-in-Arbitration-under-the-Arbitration-and-Conciliation-Act-1996
Navigating the Jurisdiction Maze: The Importance of Seat and Venue in Arbitration under the Arbitration and Conciliation Act 1996
Arbitration is a method of resolving disputes between parties without involving the courts. Instead, a neutral third-party called an arbitrator is appointed to hear the evidence and make a binding decision. The process of arbitration is governed by the Arbitration and Conciliation Act, 1996, which sets out the rules and procedures for conducting an arbitration.
One important aspect of the arbitration process is the selection of the seat and venue of the arbitration. The seat of arbitration refers to the legal jurisdiction where the arbitration proceedings take place, while the venue of arbitration is the physical location where the arbitration is conducted.
The choice of seat and venue of arbitration can have significant implications for the conduct of the arbitration proceedings and the enforcement of the award. For example, the law of the seat of arbitration will govern important aspects such as the appointment of arbitrators, the conduct of the proceedings, and the challenge and enforcement of the award.
Under the Arbitration and Conciliation Act, 1996, the parties are free to agree on the seat and venue of the arbitration. If the parties do not agree, the arbitrator or arbitral tribunal may determine the seat and venue, taking into account the circumstances of the case, the convenience of the parties, and any other relevant factors.
Section 20 of the Act provides that the place of arbitration can be determined by the agreement of the parties. If the parties have not agreed on the place of arbitration, the arbitrator or the arbitral tribunal may determine the place, having regard to the circumstances of the case, the convenience of the parties and other relevant factors.
Section 20(3) of the Act provides that the arbitrator or arbitral tribunal shall treat the place of arbitration as the seat of arbitration unless otherwise agreed by the parties. This is an important distinction as the law of the seat of arbitration will govern important aspects such as the appointment of arbitrators, the conduct of the proceedings, and the challenge and enforcement of the award.
In addition, section 20(4) of the Act provides that the parties may agree to change the place of arbitration after the commencement of the arbitration proceedings. If the parties do not agree, the arbitrator or arbitral tribunal may determine the change of place, having regard to the circumstances of the case, the convenience of the parties and other relevant factors.
CASE LAWS
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EITZEN BULK A/S v. ASHAPURA MINECHEM LTD & ANR [SC] (2016) |
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Brief facts: |
Eitzen Bulk A/S of Denmark (hereinafter referred to as `Eitzen’) entered into the contract with Ashapura Minechem Limited of Mumbai (hereinafter referred to as `Ashapura’) for shipment of bauxite from India to China. The Charter party contained an Arbitration Clause under which the seat of arbitration was London and the governing law was English law.
Disputes having arisen between the parties, the matter was referred to Arbitration by a sole Arbitrator. The Arbitration was held in London according to English Law. Ashapura Minechem was held liable and directed to pay a sum of 36,306,104 US$ together with compound interest at the rate of 3.75 % per annum. In addition they were directed to pay 74,135 US$ together with compound interest at the rate of 3.75% per annum and another sum of 90,233.66 Pounds together with compound interest at the rate of 2.5% per annum vide Award of the Sole Arbitrator dated 26.5.2009.
Ashapura appealed to Gujrat High Court, Gujrat High Court stayed the proceedings holding that a Court in India has jurisdiction under Section 34 to decide objections raised in respect of a Foreign Award. (Bombay High Court gave a contradictory judgement), Hence the appeal was filed to SC, to decide whether courts in India will have Jurisdiction over any foreign arbitration award.
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Decision:
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Appeal allowed. (Indian courts will not have jurisdictions in such cases of foreign awards) |
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Reason: |
SC held that, by Clause 28 of the arbitration agreement, the parties chose to exclude the application of Part I to the Arbitration proceedings between them by choosing London as the venue for Arbitration and by making English law applicable to Arbitration, as observed earlier.
It is too well settled by now that where the parties choose a juridical seat of Arbitration outside India and provide that the law which governs Arbitration will be a law other than Indian law, part I of the Act would not have any application and, therefore, the award debtor would not be entitled to challenge the award by raising objections under Section 34 before a Court in India. Hence this appeal is allowed.
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DREDGING CORPORATION OF INDIA v. MERCATOR LTD [DEL] (2020) |
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Brief facts: |
Arbitration Agreement existed between appellate and respondent under which the seat of arbitration was fixed at London. However, the parties by agreement agreed to have the venue of arbitration at New Delhi.
The arbitral tribunal passed the award in the favor of the respondent, against which the appellant filed an appeal in the Delhi HC.
The respondent contended as the seat of arbitration is London, courts in India have no jurisdiction to try such cases.
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Decision:
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Appeal dismissed. |
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Reason: |
The parties were very well aware of the distinction between the ‘seat’ and ‘venue’ and therefore, the respondent insisted that while the ‘Seat’ of arbitration shall remain at London, it is only the ‘venue’ which can be shifted to New Delhi. The petitioner also agreed to the same as in its opinion the change of ‘venue’ would not require any amendment to the Charter Party Agreement, while a change in seat would have required such amendment.
Not only the Charter Party Agreement(s) but also the conduct of the parties, gathered from the exchange of correspondence, their conduct before the Arbitral Tribunal as also the conduct subsequent to the passing of the Impugned Award, would lead to a conclusion that the parties agreed on the ‘Seat’ of arbitration to be at London.
In view of the above, this Court would lack jurisdiction to entertain the present petitions under Section 34 of the Act. The same is accordingly dismissed. |
Conclusion
In conclusion, the choice of seat and venue of arbitration is an important aspect of the arbitration process that can have significant implications for the conduct of the proceedings and the enforcement of the award. The Arbitration and Conciliation Act, 1996 provides the parties with the freedom to agree on the seat and venue of the arbitration, and in the absence of such an agreement, the arbitrator or arbitral tribunal may determine the seat and venue, taking into account the circumstances of the case and the convenience of the parties.
Article Compiled by:-
Mayank Garg
(LegalMantra.net Team)
+91 9582627751
Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including newspapers, Journals, Bare Acts, Case Material. Charted Secretary etc.