India scuttles Western move to put arbitration awards beyond purview of courts

A strong attempt by some countries,led by the US and some European nations,to force India to disallow appeals in arbitration awards...

Written by Maneesh Chhibber | New Delhi | Published: July 19, 2010 1:53:34 am

A strong attempt by some countries,led by the US and some European nations,to force India to disallow appeals in arbitration awards was recently defeated by an Indian delegation.

At the recently-held session of the United Nations Commission on International Trade Law (UNCITRAL) in New York,the Indian delegation was surprised when an attempt was made to push the adoption of revised version of Arbitration Rules,1976 even though some of the clauses of the proposed law went against the prevailing Indian laws. India’s successful attempt to counter the move was supported by representatives from Argentina,Canada and Malaysia.

Among the proposals put forward by the Western bloc was to put all arbitration awards beyond the purview of national courts if the parties to the arbitration agreement agreed to waive their right to take recourse to a court of law. If passed,this would have effectively meant that all future arbitration awards would be self executing if they were found to be perverse or against public policy or national interest. It is learnt that the countries pushing for the controversial amendment voiced concern over the extremely slow pace of arbitration proceedings in India as well as the lack of institutional backing for arbitration proceedings in many cases.

However,the Indian delegation led by former Union law secretary T K Vishvanathan,who is presently Advisor to the Union Law Minister,scuttled the move,saying it would be against the prevailing laws in the country.

After strong lobbying,India managed to defer the clause and ultimately it was made part of annexure as a model clause,which may be adopted by parties in the arbitration agreements if the applicable law permits.

During the proceedings,Vishwanathan is also learnt to have assured the conference that the Government of India was already addressing the issue of delays and continuing court interventions in arbitration awards. For this,he said,an amendment was considered to the Arbitration Act,1996.

It is learnt that the Western bloc wanted a clause providing for waiver of right to approach a court to have recourse against an arbitral award in the shape of New Draft Article 34 dealing with form and effect of the award.

Para 2 of the proposed clause,which read: “All awards shall be made in writing and shall be final and binding of the parties. The parties shall carry out all awards without delay. Insofar as they may validly do so by adopting these Rules,the parties waive their right to (initiate) any form of appeal,(or) review (or recourse) against an award to any court or other competent authority,except for an application requesting the setting aside of an award,and proceedings regarding execution and enforcement of an award.”

Legal experts say Indian law does not permit a waiver of a right to approach a court of law. In fact,the Indian Contract Act makes any agreement by parties waiving recourse to court as null and void. It,however,does permit parties to go for arbitration initially,instead of filing an action in courts. But,once an award is passed by the arbitrators,the right of parties to approach the court to challenge the award,on whatever grounds,is available under the arbitration law and can’t be waived.

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