The Seat Theory in Arbitration

The Arbitration and Conciliation Act, 1996 grants the authority to the parties to decide the place where the arbitration proceedings shall be held by virtue of the arbitration agreement. When the arbitration agreement does not prescribe a place, the arbitral tribunal fixes the place of arbitration. The arbitral tribunal would then consider the factors like the circumstances of the case and the convenience of the parties to appear before it. But if the agreement gives the arbitrator absolute discretion to fix such place or places as the venue of the arbitration as he thinks fit, neither side will be entitled to raise any objection in respect of it, apart from other implications, such as failure of natural justice.

Section 20, Arbitration and Conciliation Act, 1996:

20. Place of arbitration.(1) The parties are free to agree on the place of arbitration.

(2) Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties.

(3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property.”

The seat of arbitration is an important concept in arbitration proceedings. Unless already agreed between the parties, the law governing the arbitration proceedings (also referred to as curial law) shall be the law of the seat of arbitration. So in order to determine the curial law in the absence of an express choice by the parties, it is first necessary to determine the seat of the arbitration by construing the agreement to arbitrate. The arbitral procedure including the constitution of the arbitral tribunal is decided either as per the will of the parties or by the law of the country in which the arbitration takes place (seat).

Seat theory is defined as, “The concept that an arbitration is governed by the law of the place in which it is held, which is the “seat” (or “forum” or locus arbitri) of the arbitration, is well established in both the theory and practice of international arbitration.”

The Supreme Court in BALCO judgment (Bharat Aluminium Co. Ltd. v. Kaiser Aluminium Technical Service Inc.) held that for the purpose of Section 2(1) (e) of the 1996 Act, the courts at the seat of the arbitration do not have exclusive jurisdiction. Instead, two courts have concurrent jurisdiction: (1) the court which is amenable to the seat of the arbitration and (2) the court within whose jurisdiction the cause of action arises. However, in subsequent cases, this position has been changed in favour of vesting exclusive jurisdiction with the court at the seat, to the exclusion of all other courts.

The BALCO judgment further clarified that the rule regarding prospective effect was applicable only to the finding that Part l of the Arbitration Act, 1996, is applicable only to the arbitrations that take place within the territory of India, and not to other ratio laid down in BALCO.

The Supreme Court, in the BALCO judgment, has provided a detailed clarification in terms of “place”, “seat”, “situs”, and “venue”. The place agreed between the parties to conduct the arbitration proceedings under the arbitration agreement shall be the seat of arbitration. Similarly, the seat of arbitration shall be decided by the arbitrator in the absence of the contract between the parties in relation to the same. However, when the arbitral tribunal meets at any place for consultation among its members, hearing witnesses, experts, or parties, or for inspection of documents, goods, or other property, that shall be deemed to be the venue of arbitration.

In the case of Shin Satellite Public Co. Ltd. v. Jain Studios Ltd., one of the parties to the arbitration submitted that the matter should be referred to arbitration either in London or Singapore where other arbitrations were already in progress concerning the same parties but the arbitration agreement provided ‘Delhi’ as the place for arbitration. Hence, the court disallowed the request as Delhi was pre-decided by the parties as to the venue and that part of the agreement was enforceable.

When the arbitral tribunal decides the venue of arbitration, the same cannot be construed as an award by the arbitrator and neither an interim award, and therefore it cannot be appealed in the court.

REFERENCES

  • Arbitration and Conciliation Act, 1996
  • Bharat Aluminium Co. Ltd. v. Kaiser Aluminium Technical Service Inc. – (2012) 9 SCC 552
  • Shin Satellite Public Co. Ltd. V. Jain Studios Ltd. – (2006) 2 SCC 628

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

IF YOU ARE INTERESTED IN PARTICIPATING IN THE SAME, DO LET ME KNOW.

Do follow me on FacebookTwitter  Youtube and Instagram.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems at secondinnings.hr@gmail.com

In the year 2021, we wrote about 1000 Inspirational Women In India, in the year 2022, we would be featuring 5000 Start Up Stories.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.