SEAT AND VENUE UNDER ARBITRATION AND CONCILLIATION ACT,1996

 SEAT AND VENUE UNDER THE ARBITRATION AND CONCILLIATION ACT, 1996

INTRODUCTION

The concept of seat and venue has primary importance in the arbitration as it determines the place where the arbitration is to be held and also decide the jurisdiction of the courts which helps to initiate the arbitration. The Arbitration and Conciliation Act 1996 does not incorporate the word seat or venue in context to the arbitration; rather it uses the term place under Section 20 of the Act. Section 20 of the act implies that the party has autonomy only with respect to the venue related to the arbitration. The court has supervisory jurisdiction in the arbitration proceedings and the jurisdiction relates to the grant of interim measures for appointment of arbitrator.Seat with reference to arbitration is the place where the arbitration is to be held and it determines the supervisory jurisdiction of the court in arbitration. On the other hand, Venue is the place where arbitration will be held and there is no relation with respect to the jurisdiction of the court. Venue is the geographical location which is chosen as per the convenience of the parties for the arbitration proceedings.

 

If the arbitration agreement is silent on the part of determining jurisdiction, then venue will be an important factor in order to decide the jurisdiction of the court .Various judicial pronouncements have made clear distinction between the seat and venue by and has stated that venue and seat is very important in order to decide the jurisdiction and it also helps in determine the applicable law relating to the arbitration proceedings and the procedure which is to be followed in order to resolve the dispute between the parties. The BALCO case[1] has tried to clear the confusion related to the seat and venue and held that the term place indicates seat as per section 20(1) and 20(2) and section 20(3) indicates venue. The probability of conflicting jurisdiction Lays down disharmony and delay in the settlement of the dispute of the parties. The conflict of seat and venue hampers which is the sole purpose of arbitration fast and speedy settlement of disputes.

 

JUDICIAL INTERPRETATION WITH REPECT TO THE SECTION 2(2) AND 20 OF THE ARBITRATION AND CONCILIATION ACT, 1996

Ultimately, the Supreme Court synthesised the idea of party autonomy under Section 20 of the Arbitration and Conciliation Act by providing it with appropriate interpretations. As an outcome of which through which we understand the evolution of the 1996 Act, an analysis of the rulings is crucially important.

In The Case of Bhatia International V. Bulk Trading[2]

  • Brief facts of the case

That the parties agreed to enter into a contract under which the arbitration clause stated that the arbitration would have to be carried out in compliance with the rules of the International Chamber of Commerce (ICC). Problems may arise in between parties and the ICC arbitration proceedings were instituted by the respondent.

Additionally, to the arbitration proceeding, the respondent also lodged an application pursuant to Section 9 of the Arbitration and Conciliation Act attempting an injunction against the appellants to prevent their business assets and assets from being alienated in any way.

  • District and High Court Ruling
  • The District and also the High Court both held that, even though the “place of arbitration” being outside India, the court of India provide jurisdiction to arbitrate the application. Even before Supreme Court, these orders were questioned.
  • Making a reference to Section 2(2) of the Arbitration and Conciliation Act, the appellant’s argument made before the Supreme Court here is that Part I would not apply except international commercial arbitration took place in India.
  • Supreme Court Ruling
  • And according to Supreme Court’s interpretation, they provided that, an international commercial arbitration proceeding in any part of the world where an Indian party is engaged will indeed consider giving the Indian court’s jurisdiction to exercise powers under Part 1 of the Arbitration and Conciliation Act 1996.
  • Even though Court’s intention was virtuous to the extent that it needed to grant the parties a relief to preserve or freeze assets which would also help them realise their claims in the long term, the repercussions will be far reaching.
  • This judgement was justifiably overruled by the Supreme Court’s Constitutional Bench in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.

In The Case of Bharat Aluminium Company V. Kaiser Aluminium Technical Services Inc. (BALCO Case)[3]

While having to deal with poorly enforced existing laws on arbitration and conciliation, the Supreme Court promulgate this judgement provided the legislative changes with conceptual frameworks with regard to the seat and venue of the arbitration. In the contested sections, the Supreme Court has interpreted the expression “place” as signifying “seat” or “venue” depends entirely on the section wherein the term has been used.

In having to deal with Sections 2(2) and 20, the Supreme Court very expertly defined the notion of seat and venue. The Court expressly overruled the interpretations of Section 2(2) in the Bhatia International case[4] and noted that the Section had to be interpreted as meaning that Part I would apply only when the seat / place of arbitration was in India and the clear difference between both the seat and the place of arbitration was reasserted.

“The court further addressed the seat and venue doctrine underneath the Arbitration and Conciliation Act that the expression” place “used in Sections 20(1) and (2) will refer to” seat “and the expression” place “used in Section 20(3) will refer to” venue. The Court undoubtedly concluded, in having to read Section 2(2) and Section 20, that the legislation will have no extraterritorial application.

The Supreme Court was familiar with the fact that perhaps the seat-centric law would make the party’s remediless by filing the application pursuant to Section 9 if they wanted to preserve the assets of the party toward which a claim lies.

Even then, it would entail defining Section 9 in a way which was never meant to be interpreted by providing the remedy of Section 9 to parties that have chosen the seat of arbitration to be outside of the country. Any other interpretation accorded on Section 9 will indeed add up only to judicial overreach and, consequently, the court clearly stated that, if any, such errors are matters for the legislature to remedy.

Through its judgement in Enercon (India) Ltd. v. Enercon GmbH[5] and in another judgement in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.[6], the Supreme Court consequently reaffirmed and then further constructed the law established by BALCO. The Enercon case[7] clarified the stance of the law in the event that the parties failed or improperly referred to the law applicable to the arbitration agreement.

The court, making reference to the recent judgment by the Court of Appeal before Lord Justice Kerr, Lord Justice Russell and Sir Denys Buckley in Naviera Amazonica Peruana S.A v. Compania Internacional de Seuros del Peru[8], adopted the “Closest and most intimate connexion test.

In accordance with this test, where it is ambiguous which law applies to an arbitration agreement, the intention of the parties to the seat determination is essential. In addition, it is significant to the legal system wherein the arbitration takes place or to the system that has the closest and most intimate connexion with arbitration proceedings.

CONCLUSION

The result in Mankastu Impex case is correct insofar as Hong Kong was determined to be the seat of arbitration, but the Supreme Court’s avoidance towards affirming the position of law laid down Soma JV case has cast doubt on the precedential value of Soma JV. Furthermore, the Supreme Court did not explicitly follow Hardy Exploration case, albeit, it seemed to have adopted a similar approach in reaching its conclusion, particularly by emphasizing the need for additional evidence of the intention of parties’ rather than the mere use of the expression “place of arbitration”. As a result, it is unclear whether Hardy Exploration remains good in law or the bright-line test in Soma JV holds the field. According to me, the bright-line test laid down in Soma JV is certainly clearer, administered with more objectivity and aligned with the principle of party autonomy. Therefore, this controversy continues till Supreme Court decides these issues at the next suitable opportunity.

 

[1]Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2016) 4 S.C.C. 126 (India).

[2] Bhatia International v. Bulk Trading SA, (2002) 4 S.C.C. 105 (India).

[3] Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc., (2012) 9 S.C.C. 552 (India).

[4] Bhatia International v. Bulk Trading SA, (2002) 4 S.C.C. 105 (India).

[5] Enercon (India) Ltd. v. Enercon GmbH, (2014) 5 S.C.C. 1 (India).

[6] Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2016) 4 S.C.C. 126 (India).

[7] Enercon (India) Ltd. v. Enercon GmbH, (2014) 5 S.C.C. 1 (India).

[8] Naviera Amazonica Peruana S.A v. Compania Internacional de Seuros del Peru, (1988) 1 Lloyd’s Rep 116 (CA).

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