In a landmark decision handed down in September 2012, the Indian Supreme Court in Bharat Aluminium Co v Kaiser Aluminium Technical Services Inc, (Bharat Aluminium) restricted the ability of local courts to interfere in international arbitrations seated in jurisdictions outside India. The decision means that Indian courts will no longer be able to set aside awards or issue interim measures in respect of arbitrations seated abroad – a move widely regarded as exemplifying India’s emerging reputation as an arbitration friendly jurisdiction. But is this really the case?

The position before Bharat Aluminium

Arbitration proceedings in India are governed by the Arbitration and Conciliation Act 1996 (the ‘Act’). The Act is split into several Parts – the relevant parts for the purposes of this article being: (i) Part I which contains various provisions relating to, inter alia, the arbitration agreement, the composition of an arbitral tribunal and the conduct of arbitral proceedings including the annulment of awards but which is stated at Section 2(2) to apply where the place of arbitration is India; and (ii) Part II which deals with the enforcement of foreign arbitral awards (but contains no provision for the challenge or annulment of an award).

The Indian Supreme Court had ruled in Bhatia International v Bulk Trading SA (Bhatia International) that Part I of the Act also applied to arbitrations with a seat outside India so that a foreign award could be challenged and set aside under the grounds contained in Part I of the Act which are considerably wider than those under Part II.

Apr-Jun 2013 issue

Kirkland & Ellis International LLP