SC: Intl arbitration awards can be challenged here
January, 14th 2008
The Supreme Court has ruled that international arbitration awards are not immune from challenge in the Indian courts of law. The provisions of Indian Arbitration and Conciliation Act will apply even for the international commercial arbitrations held outside the country, unless the parties, by agreement, exclude all or any of its provisions. The apex courts ruling came in a verdict which set aside an order of Andhra Pradesh High Court.
The High Court had ruled that the international award cannot be challenged even if it is against public policy and in contravention of statutory provisions.
The apex court passed the verdict on the appeal of an US-based company. Venture Global Engineering, with its head office at Michigan, had entered into a joint venture agreement with Satyam Computer Services to constitute a company named as Satyam Venture Engineering Services.
It was agreed that both the parties will have 50% holding in the JV. According to the shareholders agreement between the two partners, disputes have to be resolved amicably and, failing resolution, such disputes are to be referred to arbitration.
In February 2005, disputes arose between the parties. On July 25, 2005, the Secunderabad-based company filed a request for arbitration with the London Court of International Arbitration. On April 3, 2006 , an arbitration award was passed, directing the US company to transfer shares to Satyam.
On April 14, 2006, a petition to recognise and enforce the award was filed before the a court of Michigan in US.
The appellant filed a suit a city court of Secunderabad seeking quashing of the award and permanent injunction on the transfer of shares under the Award.
The trial court rejected the plea of the appellant and the order was challenged in the HC. On February 27, 2007, the HC dismissed it and the company then appealed at the apex court. An SC bench of Justices Tarun Chatterjee and P Sathasivam said: The provisions of Part I of the Act (Arbitration and Conciliation Act, 1996) would apply to all arbitrations including international commercial arbitrations and to all proceedings relating thereto. We further hold that where such arbitration is held in India, the provisions of Part-I would
compulsorily apply and parties are free to deviate to the extent permitted by the provisions of Part-I. It is also clear that even in the case of international commercial arbitrations held out of India provisions of Part-I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions.