Introduction

In international business, there is always the case of disputes in cross border business contracts and business transactions. To prevent such hassles, parties often make use of arbitration in order to settle them. In those cases where arbitration is conducted in other countries outside India, they are considered as foreign awards. Its acceptance and recognition in India are of high significance as it ensures a clear international trade, investment security, legal certainty to the businesses that operate in different jurisdictions.

What is Foreign Award?

Foreign award is a decision made by an arbitral tribunal in a proceeding which have been carried out outside the country, India. Section 44 of the Arbitration and Conciliation Act, 1996 contains the definition. To be deemed a foreign Award, an Award should have its genesis in a business connection, should be awarded by arbitrators (not the courts) and must be funded by a nation which is a signatory to the New York Convention, 1958 or has a bilateral agreement with India.

Material elements of a Foreign Award

The key feature dimensions, which distinguish a foreign award are the following:

• Observed by Arbitrators- it is the ruling of arbitral tribunal and not that of judicial court.
• Made Elsewhere in India- The seat of arbitration should be in foreign country.
• Commercial Basis; Commercial relationship has led to such a dispute as contracts, investments and trade agreements.
• Reciprocity Principle-Reciprocity in the New York Convention/Reciprocity in the Geneva Convention to ensure enforceability in India is necessary.

India Enforcement

The practice in India as concerns the enforcement of foreign awards is regulated under Part II of the Arbitration and Conciliation Act, 1996. The principles presented in the framework are:

• Recognition Civil Societies are of the view that a foreign award is binding on parties once it is recognized under section 46.
• Execution under the terms of a Decree – A foreign award which is enforceable may be executed under Section 49 like a decree of an Indian court.
• Few grounds of refusal These include the limited grounds upon which enforcement may be refused as given in st.48.

Foreign Awards in India

The legal infrastructure of foreign awards is important in a number of ways:

•   Facilitate Trade and Investment -Businesses are assured of confidence in cross border contracts.
•   International Alignment – India is in compliance with the international conventions of arbitration under the New York Convention.
•   Effective Dispute Settlement -Prevent the long-drawn process of court litigation through the direct application of arbitral judgments.
•   Investor Confidence – Positively affects how India is situated to be arbitration-friendly.

Foreign Vs Domestic Awards

FAQs

Q1. Is that would every Award that is made abroad enforceable within India an arbitral award.

Ans: No. Only the awards made by countries which have a reciprocating arrangement can be enforceable in India.

Q2. Are foreign awards subject to the review of the merits in India?

No. Courts only scrutinize a limited number of reasons under Section 48; and cannot re-examine on the merits.

Q3. Is it necessary to know about foreign awards being given to business?

Ans: They are sources of legal certainty, and they reduce litigation costs and making cross-border investments less risky.

Q4. Whether a foreign award is similar in nature to a court judgment in India?

Ans: Once it becomes capable of execution, it can be treated as a decree of a court concerning section 49 and therefore it is executable directly as a local judgment.