Recent Development and Emerging Trends in Arbitration Law

In recent years, there has been a growing recognition of the need to modernize and streamline arbitration laws to keep peace with the evolving demands of international trade. Countries around the world have undertaken legislative reforms to enhance the efficiency and effectiveness of arbitration proceedings, with a focus on promoting transparency, accountability, and procedural fairness. Moreover, the emergence of specialized arbitration institutions and alternative dispute resolution mechanism has provided the parties with greater flexibility and choice in resolving their disputes, thereby contributing to the overall growth and development of international arbitration.

Key provisions of the Arbitration and Conciliation Act, 1996

The Arbitration and Conciliation Act of 1996 was enacted to align with the principles of the New York Convention plays an important role in regulating the arbitration proceedings in India. Section 45 of the Act empowers judicial authorities to refer the parties to arbitration upon request, subject to certain conditions. Similarly, Section 48 of the act sets out the grounds on which enforcement of foreign awards may be refused, ensuring that such awards are consistent with the Indian policy and legal principles. These provisions reflect India's commitment to promoting a pro-arbitration regime and facilitating the enforcement of foreign awards in accordance with the international standards.

Exploring the Historical Context of the New York Convention Award

The genesis of the New York Convention can be traced back to the aftermath of World War II. A period characterized by a growing need for international cooperation and economic integration. Against this backdrop, the United Nations took to a pioneering step by convening a conference in New York in 1958 to draft a convention aimed at facilitating the recognition and enforcement of foreign arbitral awards. The convention represented a significant departure from its predecessor, the Geneva Convention of 1927, by introducing a more comprehensive framework for international arbitration. Its adoption marked a watershed moment in the evolution of international trade law, laying the groundwork for enhanced legal certainty and predictability in cross border transactions.

Introduction of New York Convention Award

The New York Convention 1958 was an improvement of the Geneva Convention of 1927 since it provided for a simpler and effective method of obtaining recognition and enforcement or arbitral awards and it replaced the Geneva Convention of 1927 as between the states which are parties to both the Conventions. The New York Convention also gave much wider effect to the validity of arbitration agreements than the Geneva Protocol of 1923.

The New York Convention is also known as "The Convention on the Recognition and Enforcement of Foreign Arbitral Awards" was first adopted by the United Nations and was enforced on 7th June 1959. India was one of the founding signatories to the New York Convention 1958. It is one of the most significant treaties in the field of international trade law and has a great implication. It is often described as a foundation stone in the field of international arbitration. It requires courts of the contracting states to give effect to an agreement to arbitrate when seized of an action in a matter covered by an arbitration agreement and also to recognize and enforce awards made in other states subject to specific limitation exceptions.

Objective and Importance
With the gigantic growth of the international commerce there has been a rapid rise in the international commercial arbitration. The dispute resolution process has a huge impact on the Indian economy. One of the problems faced in such arbitration relates to recognition and enforcement of arbitral awards made in one country by the courts of other countries. This difficulty was sought to be removed through various international conventions.

Relevant Provisions under the Act
The Section 50 of The Arbitration and Conciliation Act, 1996 deals with the Appealable Orders under The New York Convention Awards.

1. Notwithstanding anything contained in any other law for the time being in force, an appeal shall lie from the order refusing to:
   
   1. refer the parties to arbitration under Section 45.
   2. enforce a foreign award under Section 48, to the court authorized by law to hear appeals from such order.
2. No second shall lie from an order passed in an appeal under this section, but nothing in this section affect or take away any right to appeal to the Supreme Court.

A Non-Obstante Clause has been added in this provision to indicate that this provision should prevail despite anything to the contrary in any other law for the time being in force.

Under the aforementioned section, the following orders are appealable:

An order of judicial authority refusing to refer the parties to arbitration under Section 45

Section 45 imposes an obligation on the judicial authority to refer the parties to arbitration at the request of one of the parties or any person claiming through such party. The court may refer the parties to arbitration according to the agreement entered between them. The court may refuse reference only if it finds out that the said agreement is:

• Null and void,
• Inoperative, or
• Incapable of being performed

An order of the court refusing to enforce a foreign award under Section 48:

Section 48 deals with the conditions for enforcement of foreign awards. It provides that the enforcement of foreign award may be refused on request of the party against whom it is evoked only if the party furnishes to the court proof that:

1. the parties to the agreement were under some incapacity or the said agreement is not a valid agreement under the law to which the parties have been subject to.
2. the parties against whom the award is evoked was not given proper notice of the appointment of the arbitrator.
3. the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement read by a competent authority of the country.
4. the subject matter or the difference or the dispute is not capable of settlement by the arbitration under the law in India.
5. the enforcement of the award would be contrary to the public policies in India.

It can observed from the above mentioned sections that both the above mentioned appeals can only be made if an order is passed refusing to refer the parties to arbitration or refusing to enforce a foreign award. Appeal cannot lie if the court has referred the parties to arbitration or enforce a foreign award.

Also, the section expressly prohibits a "Second Appeal". However, this section shall not take away any right to appeal to the Supreme Court. In view of the bar against the second appeals the conclusion seems that it was done so as to restrict the right of appeal within strict limits as defined by this section.

Relevant Case Laws:
Kandla Export Corporation Another v/s OCI Corporation and Another (2018) 14 SCC 715
In the above-mentioned case the Supreme Court was confronted with a pivotal question regarding the maintainability of appeals under different provisions of law. The question before the division bench of Supreme Court was "Whether an appeal not maintainable under Section 50 of the Arbitration Act is nonetheless maintainable under section 13(1) of the Commercial Courts Act "? The crux of the matter stemmed from an order allowing the enforcement of a foreign arbitral award which was challenged before the Supreme Court.

The Appellant sought recourse under Section 13(1) of the Commercial Courts contending that the order in question being passed by the Commercial Division of the High Court fell within the purview of appealable orders under the said provision.

However, the Supreme Court rendered a definitive ruling, elucidating the scope and limitations of appellate jurisdiction under the relevant statute. It unequivocally held that Section 13 of the Commercial Courts Act cannot be invoked to challenge an order allowing the execution of an arbitration award. This categorically assertion was grounded in the absence of any explicit provision within the Section 50 of the Arbitration and Conciliation Act, 1996 which designates an order allowing the execution of an arbitral award as appealable order.

The apex court emphasized that the right to appeal is a creature of statute, and therefore the scope of the appellate remedies must be ascertained within the parameters set forth by the relevant legislative enactments. In this context, the court reasoned that Section 50 of the Arbitration Act expressly provides a right to appeal against certain orders thereby circumscribing the avenues for appellate recourse.

Furthermore, the Supreme Court elucidated that the Commercial Courts Act while providing for a specialized forum for adjudicating commercial disputes, does not confer an additional substantive right to appeal beyond what is stipulated in the Arbitration Act. The legislative intent behind Section 50 of the Arbitration Act was deemed clear and unambiguous, thereby precluding any expansive interpretation that would permit appeals under divergent statutory provisions.

In conclusion, the judgment rendered in Kandla Export Cooperation v/s OCI Corporation and Another serves a clarion call for adherence to statutory provisions and principles of statutory interpretation in matters of appellate jurisdiction. The Supreme Court's pronouncement reaffirms the primacy of legislative intent and the need for a cohesive legal framework governing arbitration proceedings and enforcement of arbitral awards.

Vijay Karia and Ors v/s Prysmian Cair Ei Sistemi Srl and Ors AIR 2020 SC 1807
The Supreme Court laid down the ultimate test for preferring an appeal under Article 136 of the constitution of India whereby a Second Appeal is barred under Section 50 of the Act. The parties may only prevent enforcement once by approaching the court under extremely narrow grounds contained in Section 48 of the Act. If the parties then approach the court under Article 136, the Supreme Court directed that it must entertain such petition on a narrow ground, and it should entertain an appeal only if it opens up a unique question of law and requires guidance of the Supreme Court on the same.

The Supreme Court further stated that it is "only in a very exceptional case of blatant disregard of Section 48 of the Act that the Supreme Court would interfere with a judgment which recognizes and enforces a foreign award however inelegantly drafted the judgment may be".

Shin- Etsu Chemical Co. Ltd v/s Vindhya Telelinks Ltd. amd Ors AIR SC 3284
In the landmark case of Shin-Etsu the Supreme Court addressed the intricate interplay between statutory provisions governing appellate jurisdiction and the discretionary powers vested in the apex court under Article 136 of the Constitution. At the heart of the matter was the question of whether parties possess an inherent "right to appeal" to the Supreme Court under Article 136, particularly in cases where appeals are not expressly permitted under Section 50(1) of the Arbitration and Conciliation Act, 1996.

The Supreme Court elucidated that Article 136 does not confer an absolute entitlement to appeal to the Supreme Court; rather, it endows the court with discretionary authority to grant leave to appeal in meritorious cases deemed suitable for its adjudication. Importantly, neither the Arbitration and Conciliation Act, 1996, nor Article 136 bestows an automatic right of appeal to the Supreme Court against appealable orders issued under Section 50(1) of the Act.

The court emphasized that while discretionary appeals may be entertained under Article 136, such recourse should be reserved for matters of fundamental importance or public interest. In other words, the Supreme Court retains discretion to determine the significance and relevance of an appeal, weighing its potential impact on legal principles or broader societal concerns.

In rejecting the contention that Special Leave Petitions should be allowed as an alternative avenue for challenging appellate orders under Section 50(1), the Supreme Court underscored the need for judicial consistency and adherence to established legal principles. The court affirmed that the availability of discretionary appeals under Article 136 does not undermine the legislative intent behind Section 50(1), nor does it create a parallel appellate mechanism outside the purview of the Arbitration Act.

In sum, the above judgment underscores the delicate balance between statutory provisions governing appellate jurisdiction and the discretionary powers vested in the Supreme Court under Article 136. It reaffirms the principle that appeals to the Supreme Court, whether under statutory provisions or discretionary powers, should be guided by considerations of legal significance and public interest, ensuring the integrity and efficacy of the appellate process in matters of arbitration law.Top of Form

Conclusion:
In conclusion, the New York Convention stands as a pivotal framework in international trade law, revolutionizing the recognition and enforcement arbitral awards. The New York Convention, along with the Arbitration and Conciliation Act of 1996, represents a landmark achievement in the realm of international trade law. By providing a robust framework for the recognition and enforcement of arbitral awards, these legal instruments have played a crucial role in promoting legal certainty, predictability, and transparency in cross-border transactions.

The Arbitration and Conciliation Act, 1996 aligns with the principles of the convention ensuring enforceability and minimizing procedural complexities. Recent case laws notably Kandla Export Corporation v/s OCI Corporation underscore the stringent criteria for appeals, emphasizing the need for judicious interpretation and adherence to statutory provisions.

As India continues to position itself as a global hub for international arbitration, it is imperative that stakeholders remain vigilant in upholding the principles enshrined in these conventions, thereby ensuring a fair and efficient dispute resolution mechanism for all the parties involved.