The Supreme Court of India’s decision in Bhatia International v. Bulk Trading S.A. is one of the most important Supreme Court of India decisions, and it is sure to get the attention of people interested in economic and legal interactions with India. The following are the pertinent facts: The parties to an international contract had sought arbitration under the rules of the International Chamber of Commerce, Paris, to be held in Paris.
The foreign party sought interim measures protecting the Indian party’s property from an Indian court in order to ensure that, in the event of a favourable award, it would be able to recover its claim from the Indian party. The Indian party opposed to the application because the arbitration was being heard in Paris, and the New York Convention does not allow for an interim measure to be given by a court other than the one where the arbitration is being held.
The claim was dismissed by the High Court. The Indian party subsequently appealed to the Supreme Court, which upheld the decision of the High Court. In a nutshell, the Supreme Court of India concluded that Part I of the Arbitration and Conciliation Act, 1996, which gives effect to the UNCITRAL Model Law and gives the court the ability to grant interim measures, applied even to arbitrations held outside of India. The UNCITRAL Model Law is supposed to cover domestic and international arbitrations held within India, not beyond India, and this short article highlights issues regarding the soundness of this conclusion.
The Supreme Court’s decision was based on a number of factors. Below is a summary and commentary on each of them:
- In Section 1 of the Arbitration and Conciliation Act, 1996, the terms “this Act” meant the entire Act. The entire Act extends to all of India, except that the caveat to Section 1 states that it only applies to “international commercial arbitration” convened in the state of Jammu and Kashmir.
- Because of the proviso, Section 2(2) of the Act, which specifies that Part I applies when the arbitration takes place in India, cannot be taken literally.
- (c) If given literal interpretation, Part I would continue to apply in the State of Jammu and Kashmir but not in the rest of India where “international commercial arbitration” takes place outside of India. That’s the word “anomaly.”
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