Arbitration in India: Supreme Court Upholds Applicability of Foreign Law in Bharat Aluminium Case

The case of Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc. is a landmark judgment addressing international arbitration and the applicability of Part I of the Arbitration and Conciliation Act, 1996. The Supreme Court reaffirmed that Part I of the Act does not apply to arbitrations held outside India and upheld the enforcement of foreign arbitral awards.

Background of the Case

The dispute arose between Bharat Aluminium Company (BALCO) and Kaiser Aluminium Technical Services Inc. over an agreement executed on April 22, 1993, for the supply of equipment and modernization of BALCO’s production facilities in Korba, Chhattisgarh. When disputes arose, arbitration proceedings were conducted in England, resulting in two arbitral awards in favor of Kaiser Aluminium on November 10 and 12, 2002.

BALCO challenged these awards under Section 34 of the Arbitration Act before the District Judge, Bilaspur, but the applications were dismissed. The High Court of Chhattisgarh upheld this dismissal, prompting BALCO to appeal to the Supreme Court.

Key Arguments by the Petitioner (Bharat Aluminium Company)

• BALCO contended that Part I of the Arbitration Act should apply to international commercial arbitrations, allowing Indian courts to set aside foreign awards.
• They relied on the earlier ruling in Bhatia International v. Bulk Trading S.A., which held that Part I of the Act applies to international arbitrations unless explicitly excluded.
• The petitioner argued that the arbitration agreement did not expressly exclude the applicability of Indian law.

Key Arguments by the Respondent (Kaiser Aluminium Technical Services Inc.)

• The respondents maintained that the arbitration was governed by English law, as explicitly stated in the contract.
• They argued that the Arbitration Agreement (Article 17) and Governing Law Clause (Article 22) specified that English law would govern the arbitration proceedings.
• They emphasized that the arbitral awards were valid and enforceable under the English Arbitration Act.

Supreme Court Judgment

A bench comprising Justices Anil R. Dave, Kurian Joseph, and Amitava Roy ruled in favor of Kaiser Aluminium, making the following key observations:

• The agreement explicitly stated that arbitration proceedings would be governed by English law.
• Following the Constitution Bench decision in the BALCO case (2012), Part I of the Arbitration Act does not apply to foreign-seated arbitrations.
• Since the arbitration was conducted in England, and the agreement specified English law, Indian courts had no jurisdiction to interfere.
• The Court rejected BALCO’s argument that the arbitration agreement impliedly included Indian law.
• The appeals were dismissed, and the foreign awards were upheld.

Conclusion

This ruling reinforces India’s commitment to international arbitration and upholds the principle that foreign-seated arbitrations are governed by the law of the seat. The judgment ensures that parties cannot invoke Indian laws to challenge foreign arbitral awards unless the agreement explicitly provides for it.

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