The establishment of an open market in India, there has arisen a demand for such a mechanism that can dispose of and adjudicate conflicts in a timely and effective manner. Since the introduction of the Arbitration process for resolving disputes in India in 1996, there has been a debate regarding the seat and venue of arbitration. The subject becomes extremely important in deciding the issue of supervisory powers over the arbitral processes. Every arbitration must have a “Locus arbitri,” or place of arbitration, which governs the proceedings and has supervisory powers over the arbitration. For determining jurisdiction, the terms “seat” and “venue” might be perplexing.
SEAT V/S VENUE
The term “seat” is significant since it refers to the place of the arbitration or the focal point of the arbitration procedures. The ‘seat’ of arbitration is the ‘situs’ of arbitration, or the location where the arbitration is rooted. The seat of arbitration determines the curial or procedural law that regulates the arbitration, as well as which court(s) will have supervisory power over the arbitration. An arbitration proceeding in Delhi, for example, will be governed by the Arbitration and Conciliation Act of 1996, and any application challenging an arbitrator’s judgment or conclusion (Sections 34 and 37) will be handled by the Delhi High Court. In international arbitrations, the idea of the seat is especially relevant because it acts as an indicator for both curial law and supervisory jurisdiction. The ‘Venue’ of arbitration, on the other hand, only identifies the geographical site where such arbitration is held and has nothing to do with curial law or judicial jurisdiction.
The terms ‘seat’ and ‘venue’ are not defined under the Arbitration Act of 1940 or the Arbitration and Conciliation Act of 1996 (“Act”). Section 20 of the Act, on the other hand, mentions the place of arbitration but makes no distinction between seat and venue. The choice of a geographical location as the seat of arbitration has ramifications in that the courts of that jurisdiction will have supervisory authority over the arbitral process, and the procedural or curial law of the arbitration proceedings will be the law of that jurisdiction. In the absence of a choice of governing law clause in the arbitration agreements, the arbitration proceedings are typically governed by the law of the seat. Even though the terms “venue” and “seat” are occasionally used interchangeably, this has not been the best strategy. The term “seat” is unquestionably more authoritative than “venue”. Despite the fact that Indian courts have placed a high importance on the term “seat,” it appears that they have frequently associated seats with venues, resulting in a disagreement that the Supreme Court has yet to decide decisively.
In the case of Union of India v. Hardy Exploration and Production (India) Inc. (herein after referred as Hardy Exploration), the parties agreed to hold the arbitration in Kuala Lumpur but were quiet on the seat. After disagreements occurred, arbitration processes were initiated, and the award was signed in Kuala Lumpur. Following that, the appellant sought to dispute the award under the Act in the Delhi High Court, claiming that Delhi was the place of arbitration. On appeal, the Supreme Court issued a decision that deviated from the Shashoua Principle. The Court ruled that the parties had not chosen the location of the arbitration and that the Tribunal had not made any judgments in this regard. It was noted that the parties had named Kuala Lumpur as the venue of arbitration, but this did not imply that Kuala Lumpur had become the seat of arbitration. The Court came to the conclusion that a venue could only become a seat of arbitration if something else was added to it as a concomitant.
Another problem arose before the Supreme Court in March 2020 in Mankastu Impex (P) Ltd. v. Airvisual Ltd. The arbitration agreement in this case was exceptional in that it did not include the words “seat” or “venue.” The arbitration agreement stated that the arbitration would be administered in Hong Kong and that the location of the arbitration would be in Hong Kong. It further said that Indian law would govern and that the courts of New Delhi would have authority. As a result, when conflicts developed, Mankastu petitioned the Supreme Court of India for the appointment of an arbitrator, claiming that because Indian law was the controlling law and the courts in New Delhi had authority, New Delhi was the seat of arbitration. Mankastu had faith in Hardy Exploration. Airvisual asserted that because Hong Kong was designated as the place of arbitration that was also the seat of arbitration. It is important emphasizing the Supreme Court’s inquiry method in obtaining its conclusion that Hong Kong was the seat of arbitration. Instead of using the Hardy Exploration ratios, the Court took a completely different approach to the investigation. Regardless of the fact that the Court did not expressly accept Hardy Exploration, it appears to have arrived at a similar conclusion through a different line of reasoning. The Court decided that assuming that the place of arbitration would automatically become the seat of arbitration without first assessing other crucial aspects in the contract to ascertain the parties’ real intention would be dangerous.
According to the preceding analysis, the Indian Supreme Court has exhibited a reluctance to uphold Hardy Exploration, albeit it is worth noting that the Court has reached the same judgment that it would have reached had it applied the Hardy Exploration ratio. As a result, when conflicts developed, Mankastu petitioned the Supreme Court of India for the appointment of an arbitrator, arguing that because Indian law was the dominant law and the courts in New Delhi had jurisdiction, the venue of arbitration should be in New Delhi. Mankastu had faith in Hardy Exploration. Airvisual stated that because Hong Kong was designated as the venue of arbitration, it was also the seat of arbitration.
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