9 July, 2015
In Harmony Innovation Shipping Ltd v Gupta Coal India, the Supreme Court of India had to consider whether the Indian courts could exercise powers granted by Part I of the Indian Arbitration and Conciliation Act 1996 ("Arbitration Act") where the relevant agreement was entered into before 6 September 2012, but varied after that date.
Whilst previous jurisprudence had held that Part I of the Arbitration Act could apply to foreign-seated arbitrations (granting the Indian courts wide powers of intervention in such arbitrations) the Supreme Court's seminal decision in Bharat Aluminium Co. v Kaiser Aluminium Technical Services Inc., ("BALCO") reversed this principle and held that Part I of the Arbitration Act was not applicable to arbitrations seated outside India. However, the Court stated that the rule in BALCO would have prospective effect only, i.e. it would not apply to agreements executed before 6 September 2012. In the present case, the Court was faced with an agreement which had been executed prior to that date, but varied by an addendum after it.
The Supreme Court held that because the addendum did not relate to the arbitration clause, BALCO did not apply. However, the Supreme Court then went on to apply the older authorities in a pro-arbitration manner, and found that despite the lack of a clear statement as to the seat of the arbitration or the law applicable to the arbitration agreement, it was clear that the parties' intention was to choose London as the seat of the arbitration. In that light, and taking into account that the contract was governed by English law, the Court held that there had been an implied agreement to exclude Part I of the Arbitration Act, and therefore the Indian courts did not have jurisdiction to grant interim measures.
It is encouraging that even where the Indian courts are unable to apply BALCO directly, they continue to follow (at least in most instances) the pro-arbitration stance adopted in BALCO and refrain from intervening in arbitrations seated outside India.
For further information, please contact:
Nicholas Peacock, Partner, Herbert Smith Freehills
nicholas.peacock@hsf.com
Alastair Henderson, Partner, Herbert Smith Freehills
alastair.henderson@hsf.com
Donny Surtani, Herbert Smith Freehills
donny.surtani@hsf.com
