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This blog on International Commercial Arbitration concerning India discloses the necessity, essentials, and relevant provisions of the Indian Legal System while dealing with disputes in the international sphere.

What is Arbitration?

Generally, a problem is resolved before the court through litigation, but if the parties wish for Arbitration, that includes the involvement of a third party who will try to discuss and suggest possible measures to be taken by both parties and the whole process will be done outside the court. The relevant Act dealing with Arbitration in India is the Indian Arbitration and Conciliation Act, of 1996.

What is International Commercial Arbitration?

International Commercial Arbitration is a process of resolving disputes that are commercial among countries through an Arbitrator or a panel of which are commercial. There were several discussions as to the cases to be considered as “Commercial”, the New York Convention, the 1961 European Convention, and settled through the Model Law, etc.

All the states enter into various agreements regarding Trade, Intellectual Property Law, Investments and contracts, etc., so if there’s any breach relating to the same, International Commercial Arbitration plays its role in resolving the dispute. The parties involved may be Natural persons as well as Juristic Persons.

Indian Perspective:

According to Section 2(1)(f) of the Indian Arbitration and Conciliation Act,1996,  “international commercial arbitration” means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered commercial under the law in force in India and where at least one of the parties is,

  • An individual who is a national of, or habitually resident in, any country other than India; or
  • A body corporate that is incorporated in any country other than India; or
  • An association or body of individuals whose central management and control is exercised in any country other than India; or
  • The Government of a foreign country.

Agreement: International Commercial Dispute initiates with the parties in dispute signing an ‘Arbitration Agreement’ mentioning all the terms and conditions regarding arbitration which is mentioned u/s 7(1) of the Indian Arbitration and Conciliation Act,1996.

Seat of Arbitration:  Seat of Arbitration refers to the location that is decided by the parties for the legal process of Arbitration. There are several rules which differ from one to another based on the seat of Arbitration in India.

Seat in India: 

      If the seat agreed by the party is India for the dispute resolution through Arbitration, then that would be dealt with under part I of the Indian Arbitration and Conciliation Act,1996 and if the seat is outside India, part I would not be applicable and would be dealt under part II of the Act.


  • Notice: This is considered the first step before the initiation of the arbitration process. The party shall send notice to the other party asking him to resolve the dispute through Arbitration.
  • Reference from the Court: As mentioned under Section 8, if the party before the judicial authority asks to allow for Arbitration after the submission of the original Arbitration agreement, the authority shall direct the same, and if the original Arbitration agreement is not available to the party or retained by the other party, the party shall apply to the court to order the same.
  • Interim Relief: Until the final decision comes, the International Commercial Arbitration Tribunal may order interim relief to the aggrieved party. Section 9 and Section 17 of the Indian Arbitration and Conciliation Act,1996 are relevant in this case:
  • Appointment of Arbitrators:  It is mentioned u/s 11 of the Act that the Arbitrators may be of any nationality, each of the parties appoint one arbitrator and a third arbitrator will be appointed as per the suggestion of the two arbitrators.
  • Fair & Just: The role of the Arbitrator is to promote fairness and independence of judgment; the arbitrators cannot be biased while settling the dispute.
  • Flexible:  The parties to the dispute have to be flexible regarding the proceeding, language as well as place of the arbitration
  • Arbitration Cost: The tribunal shall fix an arbitration cost to be given by the parties, upon failing to pay the cost as fixed, the tribunal may not give an award. 
  • Setting aside of Arbitral Award: If an unsatisfactory award has been given by the arbitral tribunal, then the party may file an application u/s 34 of the Act for setting aside such arbitral award.
  • Appeal:  An appeal may also be filed if the tribunal refuses to provide an interim order u/s 9 or the party wants to set aside the arbitral award.
  • Enforcement: If the tribunal has awarded regarding the dispute u/s 35 of the Act, that would be considered final and hence duly enforced as an order passed by the Court of law under the Code of Civil Procedure,1908.

Landmark case on International Commercial Arbitration:

  • Bhatia International V. Bulk Trading S.A. (2002) 4 SCC 105

In this case, Both parties entered into a contract regarding the sale and purchase of goods. The contract contained an arbitration clause that specified that if there’s any dispute arose, that would be resolved by the International Chamber of Commerce located in Paris. When the dispute arose, Bhatia International initiated the arbitration proceeding Under the Indian Arbitration and Conciliation Act, of 1996. The respondent objected to the jurisdiction of the Indian courts to entertain the arbitration.

It was held that only Indian courts have exclusive jurisdiction to test the significance of an arbitral award that is made in India, even if the actual law of the agreement is the law of another country and not in India.

  • Later The case was overruled by the Supreme Court in the case of Bharat Aluminium Company Limited (BALCO) v. Kaiser Aluminium (2012).

In this judgment, the court held that Part I of the act would not apply to the cases where the seat of arbitration is outside India. It shall apply to only those arbitrations where the seat of the arbitration is India and under Part I of the Act, no suit can be filed for interim relief in India when the seat of arbitration is not in India.

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