The Changing Stance of the Indian Judiciary Towards Domestic Arbitrations with a Foreign Seat.

Ananya Verma

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The principle of party autonomy upon which the Arbitration and Conciliation Act, 1996 is founded, allows parties the freedom to choose their seat of arbitration. The seat of arbitration determines the supervisory jurisdiction of courts during the arbitration proceedings. While the freedom to choose the seat of arbitration is unfettered for the International commercial arbitrations, as defined under the statute, the same does not apply for two or more Indian parties. The Indian courts have restricted domestic parties from choosing a foreign seat of arbitration, as that would allegedly allow domestic parties to circumvent the substantive Indian laws and thereby, derogate from the same. Thus, as a matter of public policy, domestic parties have often been disentitled from choosing a foreign seat of arbitration. In doing so, not only the courts have conflated the law of the seat with the substantive law of the arbitration agreement but have also put an unjustifiable restriction on autonomy of the domestic parties choosing a foreign seat of arbitration. However, this position so adopted by the courts, seems to be changing as was seen in the recent Delhi High Court judgment of GMR Energy Limited v. Doosan Power Systems India. This paper discusses the contentious issue of restricting domestic parties from choosing a foreign seat of arbitration on public policy grounds, using various case laws, including the latest Delhi High court judgment. The paper contrasts the Indian legal regime with the English, on domestic parties choosing a foreign seat of arbitration, to suggest some features of the English Arbitration Act that could be borrowed by its Indian counterpart. Given the wide scale cross-border investments in India, it is important to understand such restrictions and promote the principle of party autonomy, under the Indian Arbitration regime, in order to facilitate the international community invest and arbitrate in India.