Dispute Of Jurisdictions

It is not uncommon and rather is considered to be a fancy to have the Arbitration clause in the Contracts for the Adjudication of disputes. However, on many occasions it seen that parties entering into such Contracts/Agreements are not wary of the consequences resulting out of such clauses and even to an extent that only a copy paste job is done while drafting these clauses without even considering the requirements of the parties entering into such Agreements.

The contractual disputes arising between the parties may get resolved by way of a Mediation/Conciliation or Arbitration wherein the parties have agreed to adjudicate upon the disputes by way of these modes. However, there are circumstances wherein one of the contracting party is a foreign national and therefore so far as Arbitration and Conciliation Act,1908 is concerned such disputes are termed as disputes arising under International Commercial Arbitration.

The growing avenues of resolving the disputes have given birth to many Institutional Arbitrations along with Ad-Hoc Arbitrations and many a times parties in dispute prefer to get the disputes resolved through Institutional Arbitrations only.

However, even before the parties could take a step towards resolving their dispute a common problem that they are faced with is a problem of Jurisdiction.

Let's take an example from a very recent Judgement decided by the Hon'ble Supreme Court of India Mankatsu Impex Private Limited Vs Airvisual Limited. One of the party being a Company Incorporated in Hong Kong therefore, the same being an International Commercial Arbitration.

The parties in order to resolve their dispute knocks at the doors of the Hon'ble Supreme Court of India. The Hon'ble court while adjudicating upon the dispute with respect to the Jurisdiction makes a reference to the cases decided by the larger bench of the Hon'ble Court i.e. BGS SGS Soma Vs. NHPC Ltd. (MANU/SC/1715/2019) & Enercon (India) Limited and Ors. Vs. Enercon GMBH and Anr. (2014) 5 SCC 1.

It is imperative to note that there has been a dissenting view of the Hon'ble Courts on the issue of Jurisdiction wherein while deciding the case of Union of India Vs. Hardy Exploration and Production (India) Inc. (2019) 13 SCC 472; the Hon'ble Court made a differentiation between the "Venue" of Arbitration & Juridical Seat of Arbitration. The Hon'ble Court while deciding the Hardy Exploration stipulated that a chosen venue could not by itself assume the status of the seat of arbitration in the absence of additional indicia. Whereas, the Larger bench of the Hon'ble Supreme Court while deciding BGS SGS Soma Vs NHPC Ltd. suggested a Bright line test for determining whether a chosen venue could be treated as the seat of arbitration. The Hon'ble Court prescribed that a chosen venue for arbitration proceedings would become the seat of arbitration in the absence of any "significant contrary indicia".

Therefore, as on date the law as it stands with respect to the Jurisdiction is that in the cases of "International Commercial Arbitration" if the seat of arbitration is India, then Part-I of the Act shall apply. The seat normally carries with it the choice of that country's arbitration/curial law. To further elaborate it can be easily said that when the parties have chosen a place of arbitration in a particular country, that choice of seat gives implied submission to the laws of that country.

However, as a word of caution, the parties entering into the Agreements should deliberate upon the personal requirements before venturing to incorporate the Law Governing/Jurisdiction/ Dispute Resolution Clauses.

Author- Dharmender Verma, Partner at Maheshwari & Co. Views are personal.