India Abolishes Its Power to Set Aside Foreign Arbitral Awards

For many years, India has been considered somewhat of a outlier in international arbitration circles because of its courts’ power to set aside foreign-seated awards, despite the New York Convention.  The Indian Supreme Court ruled a few weeks ago, in Bharat Aluminum v. Kaiser Aluminum, that Part I of the Indian Arbitration Act does not apply to international commercial arbitration awards issued outside India. Practically, this means that Indian courts will no longer have power to set aside such awards.  Until now,  this power was applicable unless the arbitration agreement excluded it.  (This power will continue for awards issued in India).  This power has been used, for example, to set aside awards after the Supreme Court decided in 2003 that awards that conflicted with Indian law are contrary to public policy and thus unenforceable.   With this ruling, the Supreme Court has endorsed the UNCITRAL Model Law principle that the law of the seat of the arbitration governs the conduct of the arbitration, and annulment actions are generally not brought outside the arbitral seat. 

Unfortunately, this ruling also means that other Part I powers such as to issue interim relief and interim injunctions to preserve assets will also no longer apply to foreign-seated arbitrations. 

This ruling affects only arbitrations arising from arbitration agreements signed after the ruling.  Thus the Part I powers will continue to be applicable to foreign seated awards for some time to come.