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Indian Supreme Court upholds choice of foreign seat by an arbitral institution

The Indian Supreme Court on 20th March 2017 considered whether to maintain a petition challenging a foreign award under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act) in India, under the pre-BALCO regime, which permits challenges to foreign awards in India unless the parties have expressly or impliedly excluded the operation of Part I of the Act. The Court held that the choice of institutional arbitral rules (ICC Rules in this case) and the consequent choice of seat by the arbitral institution (London) operated as exclusion of Part I of the Act, thereby ousting the jurisdiction of Indian Courts to maintain and entertain a challenge to the foreign award. The Court in allowing the appeal dismissed the order of the Bombay High Court.

The Indian Supreme Court's decision is a peculiarly interesting pro-arbitration judgment:

  • An arbitral institution's choice of seat, made in consultation with parties, was upheld as a valid and binding choice of seat in the absence of an express choice of seat
  • This was recognized as exclusion of Part-I of the Arbitration and Conciliation Act, 1996 (the Act), for arbitration agreements entered into prior to the judgment of the Supreme Court in BALCO v. Kaiser Aluminum (2012) 9 SCC 552
  • The Supreme Court set aside the decision of the Bombay High Court.

The decision is of particular interest as it relates to the pre-BALCO regime which has long been considered as a regressive regime in Indian arbitration.

Thus, in this crisp and well-reasoned decision, the Supreme Court has not only identified the express intentions of the parties but has also adopted a pro-institutional arbitration stance by respecting the choice of institutional arbitration rules and the consequent procedures of the institution.

This judgment promises relief to parties whose contracts date back to the pre-BALCO era where choice of seat remains absent, while choice of arbitral institution remains alive. If the chosen institutional rules contain provisions for designating the seat of arbitration, the parties will be in a position to exclude the operation of Part I of the Act where foreign seat is chosen by the arbitral institution. This will save the parties from potential situations where foreign awards might be amenable to challenge before the Indian courts.

12017 SCC Online SC 239

Information Utility Guidelines as notified by the Insolvency and Bankruptcy Board

Information Utility (IU) acts as a data storage body that collects information from various sources and stores it in a safe and secure electronic format. The information stored by the IU helps to establish defaults as well as expeditiously verify information that is communicated to the registered user thereby completing a transaction in a swift manner.

With effect from the 1st of April 2017, the Insolvency and Bankruptcy Board of India has put forward guidelines that provide for the registration and regulations of the IUs.

Some of the guidelines are as follows:

  • Some of the guidelines are as follows:
    1. It must be a public company with a minimum net worth of 50 Crores.
    2. More than half of the directors of the board must be independent directors.
    3. Persons residing outside India should not hold more than 49% of its voting share or paid up equity capital.
    4. The control of IU must not be with persons registered outside India.
    5. Promoters, Directors and Key managerial persons holding more than 5% of paid up equity share capital must be fit and proper persons.
  • Technical Standards have been laid down by the board for the performance of core services and other such services by the IU. Technical Standards provide for matters relating to authentication and verification of information to be stored by the IU.
  • A Grievance Redressel Policy to deal with any grievance from users or any other persons or class of persons as provided by the Board.
  • Appointment of a Compliance Officer responsible for ensuring compliance with the provisions of the Code. The Officer will independently report to the Insolvency Board.
6 April 2017
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