INTRODUCTION

The ease of enforcing foreign arbitral awards has been a cornerstone of the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).1
Australia has implemented the New York Convention through the International Arbitration
Act 1974 which, amongst other things, provides for the enforcement of foreign arbitral
awards in an Australian court as if the award were a judgment of the court. This article
explores whether such an enforcement mechanism invests international arbitral tribunals with
the judicial power of the Commonwealth, contrary to the requirements of ch III of the
Australian Constitution.
Part II briefly outlines s 8 of the IAA and explores the extent of judicial review permitted
under the Act. This is an important first step, as the nature and extent of judicial review of a
tribunals determination is a key indicial in determining whether the tribunal exercises
judicial power. Parts III and IV then approach the question of the constitutionality of s 8 in
two ways: a substance-focused approach in line with Brandy v Human Rights and Equal
Opportunity Commission (Brandy),3 and a more formalistic approach consistent with a
larger number of High Court authorities on ch III. The substance-focused approach in Part III
yields a strong argument for holding the IAA unconstitutional. In substance, the international
arbitral tribunal decides a controversy as to existing rights with s 8 making the tribunals
determination immediately enforceable. Part IV, however, after considering whether arbitral
tribunals can possibly exercise the judicial power of the Commonwealth as well as the
applicability of the principle in Attorney-General (Cth) v Breckler (Breckler) and
Construction, Forestry, Mining and Energy Union v Australian Industrial Relations
Commission (CFMEU), considers the nature of arbitration as an agreement to abide by the
award.
Viewing arbitration in this way, it is submitted that arbitral tribunals do not exercise judicial
power, as they create rights, as opposed to enforcing existing ones. Furthermore, s 8 merely
allows a court to enforce the agreement between the parties through a simplified procedure
for enforcing a contractual promise. On this view of arbitration, s 8 does not make the
tribunals determination immediately enforceable.
Noting that the High Court has, in recent times, preferred substance over form in
constitutional analysis, the conclusion in Part IV is somewhat unsatisfying considering that a
substance-focused approach suggests a different conclusion.
1

Part V, therefore, approaches the constitutional question in a different way. It considers

whether s 8 of the IAA undermines the objects and purposes underlying the separation of
judicial power as embodied in ch III. It begins by showing how United States courts have
taken this approach, and finds that its use in Australia is both logical and consistent with
precedent. Applying this approach, it is firstsubmitted that the objects and purposes
underlying ch III concern the maintenance of the rule of law through an independent and
impartial judiciary that is capable of enforcing and interpreting laws, all with a view to
maintaining the federal compact created by the Constitution. Since s 8 of the IAA does not
undermine these objects and purposes, it should be held constitutional.
In many respects, this article is exploring uncharted territory. The constitutionality of
enforcing foreign arbitral awards has never been fully considered by courts in Australia, nor
in the United States.6 In Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc [No 5], Emmett J,
in obiter, considered that international arbitral tribunals do not exercise the judicial power of
the Commonwealth because their determinations do not have an enforceable nature
equivalent to that of a court order.7 That case, however, was dealing with s 7 of the IAA, and
his Honour did not consider the effect of s 8.
As at the end of 2010, only 15 cases have arisen under s 8 of the IAA and its predecessor, s 8
of the Arbitration (Foreign Awards and Agreements) Act 1974 (Cth).8 However, international
commercial arbitration is becoming increasingly popular as more Australian businesses
engage in international trade.9 The IAA has recently been amended10 to further promote the
use of international arbitration, 11 and the Standing Committee of Attorneys-General has
agreed to adopt a uniform commercial arbitration bill that, in substance, is more closely in
line with the regime in the IAA.

RESEARCH METHODOLOGY

The researcher has used Doctrinal method of research throughout the preparation of the
project. The researcher has used this method in the form of1. BOOKS.
2. JOURNALS.
3. CASE LAWS.
4. WEBSITES.

OBJECTIVES AND IMPORTANCE

The objective of doing this project work is recognizing the growing importance of
international arbitration as a means of settling international commercial disputes, the
Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the
Convention) which seeks to provide common legislative standards for the recognition of
arbitration agreements and court recognition and enforcement of foreign and non-domestic
arbitral awards.

HYPOTHESIS
The researcher was of the view that foreign awards related only to those suits which took
place outside the territory. But during the pilot study, the researcher was proved to be wrong.

PLAN OF STUDY
3

1. FOREIGN AWARD- A BRIEF OVERVIEW

2. NEW YORK CONVENTION AWARD

DEFINING SECTION
POWERS OF JUDICIAL AUTHORITY OF REFERENCE
BINDING OF FOREIGN AWARDS
EVIDENCE
CONDITIONS FOR ENFORCEMENT
ENFORCEMENT OF FOREIGN AWARD
APPEALABLE ORDERS
SAVINGS
3. CONCLUSION
4. BIBLIOGRAPHY

FOREIGN AWARD- A BRIEF OVERVIEW

Prior to the enactment of the present Arbitration and Conciliation Act, 1996, the foreign
arbitration agreements and awards were regulated by two separate Acts, namely, the Foreign
Awards (Recognition and Enforcement) Act, 1961 and the Arbitration (Protocol and
Convention) Act, 1937 both of which now stand repealed consequent to passing of the
present Arbitration Act of 1996. The provisions of these two earlier enactments are
incorporated in Chapter 1 and Chapter II respectively of Part II of the present Act of 1996.
This Part i. e., Part II consists of only two chapters, the first chapter containing the provisions
of the earlier Foreign Awards (Recognition and Enforcement) Act, 1961, which relate to the
awards under the New York (or United Nations) Convention, 1958, and the second chapter is
devoted to provisions of the earlier Arbitration (Protocol and Convention) Act, 1937 which
relate to the awards under the Geneva (or League of Nations) Convention, 1927.
Section 52 of the Arbitration and Conciliation Act, 1996 provides that Chapter 1 of Part II
excludes the application of Chapter II but Chapter II does not exclude the application of
Chapter I.
Excepting Section 52 in Chapter I, both the Chapters consist of eight Sections each dealing
with same subject matter and the phraseology of the sections is also almost the same barring
Section 47 of Chapter I and Section 57 of Chapter II which deal with the enforcement of
foreign awards.
Thus it may be stated that Chapters 1 and 11 of Part II of the Act relate to awards made under
the New York Convention and the Geneva Convention respectively. The enforcement of a
foreign award may be refused if the applicant furnishes evidence before the Court that the
agreement which was entered into between the parties was invalid or that the party was
suffering from some incapacity or that the party did not receive proper notice of the
appointment of the arbitrator or arbitral proceedings or was otherwise unable to present his
case. The other provisions relating to enforcement of foreign award are similar to that of the
domestic award and there is no difference so far as enforcement of award is concerned.
The awards contemplated under this Part i.e. Part II relate to International Commercial
Arbitration. Though the term 'International Commercial Arbitration has been defined in
Section 2 (1 ) (f) of the Arbitration and Conciliation Act, 1996, the term 'Commercial' has not
been defined in the Act. However, the Model Law guidelines provide that the term
'Commercial'

should be given a wider interpretion so as cover matters arising from

transactions which are commercial in nature whether contractual or not.

5

A 'foreign award has been defined in Section 44 of the Act.It means an award made on or
after October. 11,1960 on differences arising between persons out of legal relationships
whether contractual or not, which are considered be commercial under the law in force in
India It must be stated that an award does not become a foreign award merely because it was
made in the territory outside India, but it becomes so because it is made in the territory of a
foreign state where arbitration agreement is not governed by the law of India In other words,
if an award is made on an arbitration agreement governed by the Indian Law, though rendered
outside India will not be treated as foreign award by the Indian Courts.
This may be illustrated by the leading case of Harendra H. Mehra vs Mukesh H.Mehta 1
decided by the Supreme Court. In this case, parties were two brothers having their joint
business in India as well as USA They also had properties in both the countries When
differences arose between them, they appointed an arbitrator for distribution of their business
and property between them. The arbitration agreement was made in USA and the proceedings
were held and award was made in USA.
The Court held that this was a foreign award. The differences between parties pertained to
their legal relationship which was of a commercial nature under the Indian Law The fact that
they were brothers did not take the award out of the purview of the Act. Though the parties
entered into a settlement during the pendency of arbitral proceedings and the award was made
in terms of the said settlement, it was still an 'award under the Act of 1996 and its
enforcement in India could not be refused on the ground that it was not made a decree by
Court in USA where it was passed .The Court also held that registration of award was not
necessary under the Act.

NEW YORK CONVENTION LAW

Section 44. Definition. In this Chapter, unless the context otherwise
requires, "foreign award" means an arbitral award on differences
1 AIR 1999,SC 2054
6

between persons arising out of legal relationships, whether contractual

or not, considered as commercial under the law in force in India, made
on or after the 11th day of October, 1960 (a) in pursuance of an
agreement in writing for arbitration to which the Convention set forth
in the First Schedule applies, and
(b) in one of such territories as the Central Government, being satisfied
that reciprocal provisions have been made may, by notification in the
Official Gazette, declare to territories to which the said Convention
applies.

This section defines the expression "foreign award" as also the meaning of the term
"commercial" in context of foreign awards. Foreign awards are essentially an outcome of
foreign arbitration. Therefore, it is also necessary to consider the connotation of the term
"foreign arbitration" to know exactly what is meant by a foreign award As early as 1960, the
High Court of Calcutta explained the term 'foreign arbitration' in Serajuddin v. Michael
Golodetz,2 and observed that an arbitration
(i) held in foreign lands,
(ii) by foreign arbitrators,
(iii) to which a foreign law is applicable,
(iv) in which a foreign national is involved as a party, may be termed as 'foreign arbitration'.
In the instant case all these characteristics were present and the case was decided under the
American Arbitration law and, therefore, it was held to be a 'foreign arbitration'. The case
later on came up before the Supreme Court of India3,in appeal but on different grounds.
The Supreme Court was called upon to interpret the term 'foreign award' in N.T.P.C. v. Singer
Company4 In this case an interim award was made in London which arose out of an
arbitration agreement governed by the laws of India. The Supreme Court declined to hold it
as a foreign award and decided that it was a 'domestic award' because it was governed by the
2 AIR 1960 Cal.49(para 42)
3 AIR 1963 SC 1044
4 AIR 1993 SC 998
7

Indian laws both in respect of the contract and the arbitration. The High Court of Delhi in Gas
Authority of India Ltd. vs Spie Capag S.A 5,followed the Supreme Court ruling in Singer
Case6 and examined in depth the historical developments which led to the New York and
Geneva Conventions and their consequent implementation under the two i.e.the Foreign
Awards (Recognition and Enforcement) Act, 1961 and the Arbitration (Protocol and
Convention) Act, 1937 which are now repealed by the new Arbitration Act of 1996. In this
case, it was held that the GAIL's claim for liquidated damages can proceed before the arbitral
tribunal constituted by International Chamber of Commerce and Spie Capag's extraadditional claim is not capable of being referred to arbitration because it had not given notice
of the claim as required in the arbitration agreement.
The New York Convention shall apply to the arbitral awards made in the State other than a
State where their recognition and enforcement is sought, that is only to the awards made in
foreign countries. It "shall also apply to arbitral awards not considered as domestic awards' in
the State where their recognition and enforcement is sought.'
A'foreign award' as distinguished from 'domestic award' is one which has any of the
following elements :
1) One of the parties is a national of a foreign country; or
(2) the subject matter of arbitration agreement is international in character. That is, it deals
with international commerce, trade or investment etc
(3) the award is made in a foreign country.
On the other hand, a domestic award is one which does not have any of the aforesaid foreign
elements or characteristics.
The case of Dorstener Maschine (Germany) v. Sand Plast India, 7 may be cited to illustrate the
point further. This was a case wherein an injunction was sought against the enforcement of
the foreign award in Germany but the same was refused by the Delhi High Court. The
5 AIR 1994 De1.75
6 AIR 1993 SC 998
7 (1995) 1 Arb.LR 282 (Del.)
8

disputes between the parties were referred for arbitration to Indo-German Chamber of
Commerce. The arbitral tribunal consisted of two arbitrators, one each appointed by the
parties. It allowed the claim of Sand Plast India and rejected the counter-claim of Dorstener.
On receiving the copy of the award, Sand Plast initiated proceedings in Germany for
enforcement of the award because Dorstener had no assets in India.
The respondent i.e. Dorstener opposed the enforcement of the award and prayed for an ad
interim injunction.
It was argued on behalf of Sand Plast India that the case being a foreign award in the light of
the New York Convention, the respondents were not entitled for interim injunction as the case
involved in Indian Company seeking enforcement of award against a German Company in
Germany because the latter had no assets in India. In view of these circumstances, the
German Company should not be permitted to restrain the Indian Company fron enforcing the
award in Germany by seeking an interim injunction.
The Court accepted Sand Plast's Plea and rejected the arguments advanced on behalf of
Dorstener. It was held that since the agreement had a foreign element involving international
trade and commerce, the New York Convention was applicable to the case.
It may be pointed out that New York Convention deals with both, the arbitration awards and
arbitration agreements.

Section 45. Power of judicial Authority to refer parties to arbitration. Notwithstanding

anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a
judicial authority, when seized of an action in a matter in respect of which the parties
have made an agreement referred to in Section 44, shall, at the request of one of the
parties or any person claiming through or under him, refer the parties to arbitration
unless if finds that the said agreement is null and void, inoperative or incapable of being
performed.
This section opens with a non obstinate clause giving over-riding effect to the provision
contained therein and making it mandatory to prevail over anything to be contained in the
Arbitration Act or the Code of Civil Procedure. The use of the word 'shall' makes it obligatory
upon the Court to pass the order staying the legal proceedings commenced by a party to the
agreement if the condition specified therein are fulfilled. 8 However, before staying the
proceeding the Court should be satisfied that the arbitration agreement is valid, operative and
capable of being performed and there is existence of disputes between the parties with regard
to the matters agreed to be referred to arbitration. This in other words means that it is
obligatory for the Court under the circumstances envisaged in Section 45 to refer the parties
to arbitration, which in result would necessitate stay of the suit or other legal proceedings.
Both New York Convention (Para 3 of Article II) and Geneva Convention (Para 4) enjoin a
duty upon the Courts to refer the parties to arbitration and obtain arbitrator's decision instead
of Court unless it (court) finds that the said agreement is null and void or incapable of being
performed. The provision of the New York Convention thus imposes a responsibility on the
Court to stay the action or legal proceedings and refer the parties to arbitration.
Explaining the scope of Section 45, the Apex Court in Owners and Parties Interested in
Vessel MV 'Baltic Confidence' v. STC,9 inter alia, observed : "Attempt should be made to
give meaning and effect to the incorporation clause, if the intention of the parties to refer
disputes to arbitration is clear.....The incorporation clause ought not to be invalidated or
frustrated by use of literal, pedanntic and technical interpretation. Where incorporation clause
in conditions of carriage of bills of lading clearly set out that all terms and conditions of the
8 Renu Sagar power Co. Ltd v General Electric Company, AIR 1985 SC 1156
9 AIR 2001 SC II 2381
10

charterparty including the law and arbitration clause are herewith incorporated, the arbitration
clause in charterparty was applicable to dispute between the endorsee of bills of lading and
owners and charterers of the ship concerned. It was immaterial that the expression
charterparty in the arbitration clause in the charterparty agreement was not changed to bill
of lading. The High Court erred in not allowing application of the owners of the ship under
Section 45 seeking stay of a suit filed by the endorsee of the bills of lading and for reference
to arbitration.
The Supreme Court, therefore directed that the suit be stayed and reference to arbitration be
ordered by the High Court. Where one of the parties to an arbitration agreement institutes a
suit in a Court of law of the contracting State despite the fact that there was an arbitration
agreement.Section 45 of the Act empowers the judicial authority i.e. the Court to refer the
parties back to arbitration if the following conditions are satisfied
1. There is an agreement between the parties to which the New York or Geneva Convention
applies;
2. The action relates to a matter agreed to be referred to arbitration;
3. The Court is satisfied that the arbitration agreement is not void or inoperative or incapable
of being performed;
4. The dispute arose out of the legal relationship, whether contractual or not; and
5 Such differences are considered as 'commercial under the law enforce in India.
The provision contained in Section 45 relating to New York Convention is analogous to that
contained in Section 54 of the Act which relates to Geneva Convention.
In Shin-Etsu Chemical Co. Ltd. v Aksh Optifibre Ltd. & Another,10 the reference of dispute
for arbitration arising out international agreement involving foreign law came for the
consideration before the Court. The reference was rejected on the ground of invalidity of
agreement under Section 45 of the Act. The judicial authority is required to pass reasoned
order after hearing the parties. The impugned order is liable to appeal under Section 50 (I) (a)
of the Act. However, where the finding of the Court is in favour of validity of arbitration
10 civil Appeal arising out of SLP No 3160/2005 decided by the Supreme Court
on August 12,2005
11

agreement, it is not appealable under Section 50 of the Act. It therefore, follows that only
order declaring arbitral agreement as invalid is appealable.
These sections i.e., Section 45 and Section 54 of the Indian Arbitration and Conciliation Act,
1996, made under New York and Geneva Conventions, respectively, provide that an
application or request for staying the action for referring parties to arbitration may be made
by either of the parties or any person claiming through or under him." Such reference to
arbitration shall not prejudice the competence of the Courts in case the agreement or the
arbitration becomes inoperative or cannot be proceded further for one reason or the other.
The Supreme Court has, however, expressed a view that where a dispute is amenable to
international arbitration, interim injunctions against such reference should not be allowed to
continue for a long time and the domestic Courts should restrict such grant of interim
injections11

11 R.Dressor Rand S.A. v R.G.Khosla compressors Ltd., 1995 Supp.(3) SCC 181
12

Section 46 When foreign award binding. .Any foreign award which would he
enforceable under this Chapter shall be treated as binding for all purposes on the
persons as between whom it was made, and may accordingly be relied on by any of
those persons by way of defence, set off or otherwise in any legal proceedings in India
and any reference in this Chapter to enforcing a foreign award shall be construed as
including references to relying on an award.
Article V Para 1 (e) of the New York Convention provides that an award would be binding on
parties when
(i) it has been made by a regular proceeding, and
(ii) it complies with the formalities required for an arbitral award. It becomes final when
application for setting aside is refused. A 'binding' award is enforceable. but it is not final as
long as it is 'open to means of recourse.' It is for this reason that the New York Convention
has avoided to use the term final in place of binding as is found in Article 1 (2) (d) of the
Geneva Convention In other words, Geneva Convention makes award to be final in the
country in which it is made therefore. any proof of 'means of recourse' is no longer available
against the award This is not so under the New York Convention and the enforcement of
award can be sought in another country without seeking leave for enforcement 'exequatur
from the country where the award was made
Where an award has not yet become binding nor has it been set aside or suspended the
enforcement of the award may be refused by the country in which it is made. An award
becomes 'binding' once the ordinary means of recourse such as an appeal is no longer
available.
Under the Indian law. an arbitral award is recognised as binding and final after the expiry of
the period for making application for setting aside of the award or where such an application
was made, but rejected. It would be pertinent to refer to the Supreme Court decision in Fargo
Freight Ltd.vs Commodities Exchange Corporation & others 12. wherein a petition for
enforcement of the English award was filed by the appellants who were the owners of vessel
DEKHODA . They had chartered out the said vessel to the respondent and there arose a
12 AIR 2004 SC 4109
13

dispute regarding payment of freight and demurrage charges etc The Court in this case held
that under Section 46 of the Arbitration Act 1996. the enforcement of award has necessarily
to be between parties to the award and liability of third persons (i.e. Bank in this case) could
not be decided because Part II of the Act does not permit Courts to decide such disputes with
third parties in such proceedings.
Section 46 of the Act provides that a foreign award cannot be challenged on merits, being
final, conclusive and binding for all purposes, except the circumstances set out in Section 48
in which enforcement thereof will be refused. Domestic Courts cannot set aside or annul a
foreign award. The Court has only jurisdiction to decide whether the award is enforceable or
not13

13 Ludwing Wunscha & co.v Raunaq international,AIR 1983 Del.247

14

Section 47. Evidence.

(1) The party applying for the enforcement of a foreign award shall, at the time of the
application, produce before the Court authenticated in the
(a) the original award or a copy thereof, duly authenticated in the manner
required by the law of the country in which it was made,
(b) the original agreement for arbitration or a duly certified copy thereof; and
(c) such evidence as may be necessary to prove that the award is a foreign award.
(2) If the award or agreement to be produced under sub-section (1) is in a foreign
language, the party seeking to enforce the award shall produce a translation into
English certified as correct by a diplomatic or consular agent of the country to which
that party belong or certified as correct in such other manner as may be sufficient
according to the Law in the force in India.
Explanation.-ln this section and all the following sections of this chapter "Court" means the
principal Civil Court of original jurisdiction in a district, and includes the High Court in
exercise of its ordinary original civil jurisdiction having jurisdiction over the subject-matter
of the award if the same had been the subject-matter of a suit, but does not include any Civil
Court of a grade inferior to such principal Civil Court, or any Court of Small Causes.
This section lays down the method of proof for the enforcement of the foreign award. Article
V Para 1 (c) of the New York Convention provides that 'recognition and enforcement of the
award may be refused at the request of the party against whom it is invoked, only if that party
furnishes proof that the award deals with a dispute or difference not contemplated by, or not
falling within the terms of reference of arbitration or it contains decisions on matters beyond
the scope of submission to arbitration. Similar provision exists in Article 2 (c) of the Geneva
Convention. This has been further elaborated in the succeeding Section (i.e., Section 48 of the
Arbitration and Conciliation Act 1996).

15

The High Court of Madras in Compania Naviera 'SODNOC' v. Bharat Refineries Ltd. 14, held
that a party having foreign award in its favour could straightaway apply for its enforcement
since foreign award is already stamped as a decree. Such an award may be enforced within a
period of 12 years time as in case of a decree-holder of a Court.
The Court in this case pointed out the leave of English Court for enforcement of foreign
award was necessary only when the award was sought to Be enforced in courts of
England,but no such leave is necessary for enforcement of such award in Indian courts.
Section 48
Conditions for enforcement of foreign awards.
(1) Enforcement of a foreign award may be refused, at the request of the
party against whom it is invoked, only if that party furnishes to the court
proof that
(a) the parties to the agreement referred to in section 44 were, under the
law applicable to them, under some incapacity, or the said agreement is not
valid under the law to which the parties have subjected it or, failing any
indication thereon, under the law of the country where the award was
made; or
(b) the party against whom the award is invoked was not given proper notice
of the appointment of the arbitrator or of the arbitral proceedings or was
otherwise unable to present his case; or
(c) the award deals with a difference not contemplated by or not falling
within the terms of the submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to arbitration: Provided that, if
the decisions on matters submitted to arbitration can be separated from
those not so submitted, that part of the award which contains decisions on
matters submitted to arbitration may be enforced; or
(d) the composition of the arbitral authority or the arbitral procedure was
not in accordance with the agreement of the parties, or, failing such

14 AIR 2007 Mad 251

16

agreement, was not in accordance with the law of the country where the
arbitration took place; or
(e) the award has not yet become binding on the parties, or has been set
aside or suspended by a competent authority of the country in which, or
under the law of which, that award was made.
(2) Enforcement of an arbitral award may also be refused if the Court finds
that
(a) the subject-matter of the difference is not capable of settlement by

arbitration under the law of India; or

(b) the enforcement of the award would be contrary to the public policy of India.
Explanation.Without prejudice to the generality of clause (b) of this section, it is
hereby declared, for the avoidance of any doubt, that an award is in conflict with the
public policy of India if the making of the award was induced or affected by fraud or
corruption.
(3) If an application for the setting aside or suspension of the award has been made to a
competent authority referred to in clause (e) of sub-section (1) the Court may, if it
considers it proper, adjourn the decision on the enforcement of the award and may also,
on the application of the party claiming enforcement of the award, order the other party
to give suitable security.
The New York Convention would recognize and enforced the award even if only one party
belongs to the signatory state. But as against this, the Geneva Convention requires that the
party to the award must belong to two different signatory States, then only the award may be
recognised and enforced. In other words, if the award has been made in a country which is
not signatory to the Geneva Convention or if it is between persons who are not subject of
jurisdiction of signatory State, it may not be recognised and enforced.
It may be noted that the triology of Sections 46, 47 and 48 collectively deals with the legal
status of foreign award and its proof for being recognised and binding. While Section 46
envisages bindingness of the award for all purposes, Section 47 provides the method of proof.
The present section (i.e., Section 48) deals with the conditions for enforcement of foreign
awards and enumerates the circumstances which justify Court's refusal to enforce the award.

17

The listed circumstances have to be rigidly proved in order to refuse the enforcement of the
award. Briefly stated, these circumstances are :
(1) If the arbitral agreement is invalid;
(2) Due process of law has been violated;
(3) Arbitrator has exceeded his authority;
(4) Irregularity in the composition of Arbitral Tribunal or arbitral proceedings;
(5) Award being set aside or suspended in the country in which, or under the law which, that
award was made:
(6) Non-arbitrability of the dispute; and
(7) Award being contrary to public policy.
It, therefore, follows that for the enforcement of foreign award there is limited scope of
enquiry as mentioned in Section 48 of the Act. 'Explanation' to Section 48 further makes it
clear that if the making of the award was induced or affected by fraud or corruption, it would
be deemed to be opposed to the public policy in India and, therefore, it would not be
enforceable.
Sub-section (3) of Section 48 provides that where a party has made an application for setting
aside or suspension of the foreign award, the Court, on the application of the party claiming
enforcement of the award, may require the other party to give suitable security, if it considers
it proper and reasonable.
In Sia Bioenergie (decree-holder) v. SHEC Systems (Judgment-debtors) 15 a submission was
made on behalf of the Judgment debtor for permission to lead oral evidence in support of the
objections to the enforcement of the award dated 19th May 2003 under Section 48 and 34 of
the Arbitration Act 1996.The Delhi High Court explained at length the true meaning and
import of the phrase "furnish proof to the Court" used in Section 48 (1) and held that the
whole purpose of the Act would be completely defeated if permission is granted to the
applicant (judgement debtor) to lead oral evidence at the stage of objections raised against an

15 AIR 2005 Del. 95

18

arbitral award. The process of oral evidence would prolong the process of hearing objections
which would be contrary to the main objective of the arbitration Act.
The provisions of the Act are meant to ensure fair, efficient and expeditious disposal of
disputes through arbitration with minimal interference by the court. Section 42 (2) (h) of the
Act empowers the Court to set aside the arbitral award made outside India if it violates Public
Policy. Similar provision is contained in Section 34 (2) (b) where the arbitral award is made
in India. The use of the words "if the Court finds that in the section makes it clear that it is not
necessary for the party to plead that the award violates Public Policy but the duty is cast on
the Court itself to see that the award is not in violation of Public Policy.In Renusagar Power
Co. Ltd. v. General Electric Co. Ltd 16. , which arose under the Foreign Awards (Recognition
& Enforcement) Act, 1961 which implemented the New York Convention of 1958 relating to
recognition and enforcement of foreign awards, the Supreme Court inter-alia observed: "In
order to attract the bar of Public Policy, the enforcement of the award must involve something
more than mere violation of the law of India. The enforcement of a foreign award would be
contrary to public policy if it is contrary to
(a) fundamental policy of Indian Law;
(b) the interests of India; and
(c) justice and morality."
The Supreme Court in Transoccan Shipping Agency v. Black Sea Shipping 17 rejected the
contention that enforcement of an international foreign award made in Ukraine would be
against public policy as the arbitrator was an employee of one of the parties and, therefore,
would not be independent.
It may, however, be stated that the phrase 'public policy' has been interpreted differently by
Courts depending on whether "the award is made by international or domestic Arbitration
Tribunal. This is why the noted Belgium arbitration expert Bernard Hanotian has described it
as the most confusing notion which has ever been invented." It is heartening to note that the
Arbitration (Amendment) Bill, 2003 seeks to define the term 'public policy' so as to give it an
exact meaning.
16 AIR1994 SC 860
17 (1998) 2 SCC 281
19

The Supreme Court in Venue Global Engineering v. Satyam Computer Services Ltd. &
Another,18 held that foreign award which was passed outside India cannot be said to be not
enforceable in India by invoking provisions of the Arbitration and Conciliation Act, 1996 or
the Code of Civil Procedure, 1908. However, it will be open to the parties to exclude the
application of the provisions of Part I of the Arbitration Act by express or implied agreement,
otherwise, the whole Part I would be applicable. In any event, applying the provisions of
Section 34 to foreign international awards would not be inconsistent with Section 48 of the
Act, or any other provision of Part II. Even in case of foreign awards involving properties
situate in India but the judgment-debtor residing abroad, the award can be enforced against
such properties in India either through personal compliance of the judgment-debtor or by
holding out a threat of contempt. In such a case, the judgment-debtor cannot be deprived of
his right to file an application for setting aside the award under Section 34 of the Act.
In the instant case, the enforcement of a foreign award directing the appellant foreign
company to transfer shares in Indian company (respondent) was sought by the respondent in
foreign Court (US District Court) was held to be violative of share-holder's agreement and
therefore, the appellant can challenge the award under Section 34 of the Arbitration Act in
Indian Court. That apart, in view of the injunction restraining the respondent from effecting
transfer of shares being the respondent ought not to have proceeded with the matter in a
foreign Court without getting the earlier injunction order vacated.19

18 AIR 2008 SC 1061

19 Ibid paras 22 ,25
20

Section 49. Enforcement of foreign awards. Where the Court is satisfied that the foreign
award is enforceable under this Chapter, the award shall be deemed to be a decree of
that Court.
The section confers the status of decree on foreign award as a result of which it becomes
executable by its own force. This deeming provision has been incorporated in this section
with a view to ensuring smooth and speedy execution of recognised and unobjectionable
foreign awards.
The Supreme Court in Fuerst Day Lawson v. Jindal Exports Ltd, 20 held that the provisions of
Sections 46 to 49 read together make it clear that no separate proceedings are necessary for
the enforcement of foreign award. The Court can decide the enforceability of the award to
make it a decree or rule of Court and also take up its enforcement in the same proceedings
instead of two separate proceedings.
It may be reiterated that even in case of domestic award. the new Arbitration Law of 1996
equates it to a decree of the Court enforceable by its own force without the necessity of award
being filed in the Court for execution as a decree. There is no right of appeal against the
recording of satisfaction by the Court, under Section 49 of the Act.
It must be stated that the procedure for enforcement of awards under the Geneva Convention
of 1937, the New York Convention of 1958, and Section 49 of the Arbitration and
Conciliation Act, 1996 is much the same. Any person who is interested in enforcing a foreign
award may apply in writing to any Court having jurisdiction over the subject matter of the
award. The Court for this purpose would be Principal Civil Court of Original Jurisdiction in a
District and High Court exercising original jurisdiction in civil suits. Alongwith the award
and the agreement on which it is based, sufficient evidence showing that the award is a
'foreign award' should also be filed by the party applying for the enforcement of the award.
20 AIR 2001 SC 2293
21

The award becomes a decree of the Court on Court being satisfied that it is a foreign award
enforceable under the law. There is no provision in the Act for issue of notice to the affected
party before Court makes it a decree.
The Apex Court in M/s Kochi Navigation Co. V. M/s Hindustan Petroleum Corporation Ltd. 21
Observed that the meaning of the 'foreign award' should be interpreted in the light of the
New York Convention and its implementing legislation in India. The award must be executed
as it is. The only ground on which it may be modified is its ambiguity.

21 1989 SC 2198
22

Section 50. Appealable orders.

(1) An appeal shall lie from the order refusing to :
(a) refer the parties to arbitration under Section 45;
(b) enforce a foreign award under Section 48, to the Court authorised by law to
hear

appeals from such order.

(2) No second appeal shall lie from an order passed in appeal under this section. but
nothing in this section shall affect or take away any right to appeal to the Supreme
Court.
The section enumerates two circumstances referred to under Sections 45 and 48 when an
appeal shall lie against those orders. There is no provision for a second appeal but the section
does not preclude the right of the parties to appeal to the Supreme Court against the order
passed by the appellate Court
In Orma Impex Pvt. Ltd. v. M/s Nissai Asb Put. Ltd 22 the question for consideration before
the Supreme Court was whether an appeal against an order of Single Judge of High Court
under Section 45 refusing to refer parties to arbitration would lie to Division Bench of that
High Court? Due to conflicting decisions of the Calcutta High Court and High Court of
Bombay, the Supreme Court thought it appropriate to direct this special leave petition to he
placed before its three Judge Bench. In State of West Bengal v. M/s. Gourangalal Chatterjee 23
the High Court of Calcutta took the view that no further appeal would lie against the order
passed by the Single Judge of a High Court to its Division Bench. But the High Court of
22 AIR 1999 SC 2871
23 (1993) 3 SCC 1
23

Bombay had taken a contrary view in this regard in its decision in Vanita Khanolkar v Pragna
M. Pai24, and observed that such an appeal is permissible relying upon Clause 15 of the
Letters Patent applicable to High Court of Bombay.
The instant appeal before the Supreme Court was against the order of Single Judge of the
Delhi High Court wherein the High Court had taken a view that no further appeal would lie
under Section 50 of the Arbitration and Conciliation Act, 1996 against an order made under
Section 45 of the Act rousing to refer parties to arbitration. The Apex Court regretted that in
this case, the learned Single Judge had not taken notice of Section 10 of the Delhi High Court
Act and Clause 10 of the Letters Patent which apply to High Court of Delhi.
The Supreme Court, in ITI Ltd. v. Siemers Public Communications Network ltd 25 held that
even though no second appeal shall lie from the order of the appellate Court passed under
Section 37 of the Act, but a revision petition under Section 115 of the Civil Procedure Code
can be filed against such orders.
The Supreme Court in Sumitomo Corporation v. CDC Financial Services (Mauritius) Ltd &
others26, held that Section 50 of Arbitration Act, 1996 provides for appeal against appealable
order and the forum to which such appeal would he will be the 'Court authorised by law to
hear appeal from such order'. It is clear from the provision contained in Section 37 of the Act
which provides that appeal would lie to the Court which hears the appeal and not the Court
which exercises original jurisdiction if the subject matter had been a suit as provided in the
explanation to Section 47 or Section 2(c) of the Arbitration Act.
As per the provision of Section 50 of the Arbitration Act in the instant case, the appeal against
the order of the Company Law Board (CLB) refusing to refer parties to arbitration, would lie
to the High Court which hears appeals from the ordering of the CLB, within the jurisdiction
of which the Registered Office of the company is situated. The High Court of Delhi
dismissed the appeal filed by the appellant for lack of territorial jurisdiction holding that
Section 10 (1) (a) of the Companies Act, 1956 will take precedence over Section 50 of the
24 AIR 1998 SC 424
25 AIR 2002 SC 2308

26 AIR 2008 SC 1594

24

Arbitration and Conciliation Act, 1996. This order of the High Court was maintained by the
Supreme Court being in accordance with the law in India.
Section 51. Saving. Nothing in this Chapter shall prejudice any rights which any person
would have had of enforcing in India or any award or of availing himself in India of any
award if this Chapter had not been enacted.
The provision contained in this section is a saving clause which is self-explanatory and hardly
need any further comment.
Section 52. Chapter II not to apply. Chapter II of this part shall not apply in relation to
foreign awards to which this Chapter applies.
Section 52 of the Act statutorily excludes the application of the succeeding Chapter II
relating to Geneva Convention Awards to foreign awards to which the New York Convention
Chapter I applies. In other words, this section contemplates that Chapter II shall not be
applicable to foreign awards to which the provisions of New York convention as contained in
Chapter I apply.

25

CONCLUSION
The enforcement of foreign arbitral awards under the IAA is one scheme in alist of many that
have been established to cater for the needs of a changing world, but at the same time, have
posed a potential challenge to the requirements of ch III. The High Court has traditionally
considered these challenges by analysing whether judicial power has been invested in a
non-ch III body.
This article has shown, however, that such an approach leads to an unsatisfactory conclusion
when applied to s 8 of the IAA. Considering judicial power from a substance-focused
approach in line with Brandy suggests that the IAA is unconstitutional, whereas a more
formalistic analysis, viewing international arbitration as an agreement by the parties to abide
by the determination of an arbitrator, suggests a different conclusion. Accordingly, this article
has shown that the IAA necessitates another approach; an approach similar to that of the
United States Supreme Court in Schor. Adopting this approach, this article has concluded that
as s 8 does not undermine the purposes underlying ch III the rule of law, an independent
and impartial judiciary and the maintenance of the federal compact
it should be held constitutional. Although this supports the conclusion in Part IV of this
article, it is intellectually more satisfying as the conclusion is based on substance, not form.
The High Court could benefit from adopting this American approach in cases where the
application of the concept of judicial power is ambiguous. The Takeovers Panel case is such

26

an example, with the ambiguity seen in the High Courts and Federal Courts differing
conclusions.245 Underlying the High
Courts reasoning may have been an assessment that the Takeovers Panel did not undermine
the purposes underlying ch III.246 However, an explicit analysis of the schemes effect on ch
IIIs purposes would have made for a more compelling process of reasoning. As the Court
has, evidently, decided against this course of reasoning, it is likely that it would instead adopt
reasoning similar to that found in Part IV of this article when considering s 8 of the IAA.
Even so, Part V still serves a purpose in showing that, despite the unsatisfactory means with
which Part IV arrives at its conclusion, such a conclusion is still correct, as international
arbitration does not undermine the purposes underlying ch III.
Accordingly, businesses can engage in international transactions with the confidence that
foreign arbitral awards can be enforced in Australia under s 8 without impermissibly
investing international arbitral tribunals with the judicial power of the Commonwealth.

27

BIBLIOGRAPHY
1. Id. at 616, citing Hide Trading Corp. v. Field Echenique Compania, Gaceta Judicial, vol.
68, p. 139, Transl. in 6 ARB. J. 159 (1951).
2. See Takeovers Panel (2008) 233 CLR 542; Australian Pipeline Ltd v Alinta Ltd (2007) 159
FCR,301.
3. McLaughlin, Enforcement of Arbitral Awards at 304.
4. Corporacion Salvadorena de Calzado, S.A. ("Corsal, S.A.") v. Injection Footwear Corp.,
533 F. Supp. 290 (S.D. Fla. 1982
5. McLaughlin, Enforcement of Arbitral Awards at 302-03 and n.138, citing Note, Enforcing
International Commercial Arbitration Agreements and Awards Not Subject to the New York
Convention, 23 VA. J. INTL. L. 75, 98 (1982).

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