Arbitral Award
An arbitration or an arbitral award can be defined as the concluding decision given by an arbitrator as a final resolution or a judgement to the parties involved in the arbitration. The award is a binding decision on all the parties involved in the arbitration dispute. It is rendered by an arbitral tribunal only after having heard all the parties involved in the dispute. Rendering of arbitral award refers to the termination of arbitral proceeding.
An arbitral award as per Section 35 of the Arbitration and Conciliation Act 1996 is essentially final order given by the arbitrator in accordance to the Act, that is legally binding like a judgement on the parties involved in an arbitration dispute.
The term arbitral award has not been explicitly defined in the Arbitration and Conciliation Act, 1996 but it includes “interim award” as per Section 2(1)(a) of the Act.
Arbitral award as per International Chamber of Commerce:
The ICC Rules of Arbitration define and regulate the management of cases received by the International Court of Arbitration.
Article 2 of the ICC rules defines an arbitral award as an “award” includes, inter alia, an interim, partial, final, or additional award.
Form and Contents of an Arbitral Award:
Section 31 of the Arbitration and Conciliation Act 1996, provides for the essential requirement’s (form and contents) as to how an arbitral award must be rendered by an arbitrator and states that:
Signature:
An arbitral award shall always be made in writing and shall be signed by all the members of the arbitration tribunal mandatorily. In case the arbitration proceeding includes more than one arbitrator, the signature of majority members of the arbitration tribunal will suffice as long as the reason for the omission of any signature is stated.
Reasoning:
The arbitral award shall state the reasons upon which it is based unless the parties have agreed to omit the reasons either mutually or via an agreement.
Date and Place:
The arbitration award shall also state the date and place where the arbitration award was determined (in accordance to Section 20 of the Act) and once the award is rendered a signed copy shall be delivered to all the parties involved.
Interim relief:
The arbitral tribunal at any time during the proceeding may also make an interim order i.e. A temporary relief pertaining to a specific issue until the final award is pronounced.
Sum and interest of award:
Unless agreed otherwise by the parties the arbitration tribunal may also include the rate of interest that is to be paid upon the sum of money awarded as an arbitral award either on the part of whole of the sum awarded and may impose the said award from the period between the date on which the cause of action arose and date on which the award was made. or part of the award as the tribunal may think fit.
Types of Arbitral Award:
Arbitration Tribunal in India is entitled to govern and render awards that are binding both domestically and internationally.
Domestic Awards:
Section 2(7) of the Arbitration and Conciliation Act of 1996, provides that an arbitral award made under this part i.e. Part I from Section 2 – 43M shall be considered as a domestic award.
Domestic awards refer to awards passed by the arbitration tribunal seated in India for parties who are citizens of India and where the cause of action for the dispute arises in India . The proceedings are governed by the Arbitration and Conciliations Act, 1966 and other specific provision of Indian Law applicable. For the dispute to be regarded as domestic it must not include a foreign nationals, body corporate or government entities.
Foreign Awards:
Foreign awards in India are governed by the New York Convention rules since India is a signatory to the same, the Arbitration and Conciliation Act of 1996 adopted the New York Convention rules for the recognition and enforcement of Foreign Awards. A foreign Award can be rendered in India or can be made in a country that is also signatory to the New York Convention or in a territory of a country where reciprocal provisions have been adopted.
Foreign award as defined in Part II of the Act under Section 44 means that an arbitral award on differences between persons arising out of legal relationships, weather contractual or not, considered as commercial under the law in force in India. The law applicable to the conduct of the arbitration and the merits of the dispute may be Indian Law or foreign law, depending on the contract in this regard, and the rules of conflict of laws.
Additionally the foreign awards are also executed as per the Geneva Convention on execution of the foreign award,1927. All countries signatories to the said convention are bound by an award rendered made in one of the signatory country. This allows for a standardized approach to be establish while enforcing and ensuring that signatory countries will reciprocally recognize and enforce each other's arbitral awards.
The Act also provides binding power of foreign awards as per Section 46 and 55 of Chapter I and II of the Act respectively. Any foreign award which would be enforceable under these Chapters shall be treated as binding for all purpose in between people with whom it was made, and these said awards may be relied on by other persons as defence, set off or as a precedent in any legal proceedings in India.
The essentials for a foreign award to be binding are:
- A foreign national or habitual resident of a country other than India
- A corporate body incorporated in a country other than India .
- The government of a foreign country
- A company or association of people managed in any country other than India.
Distinction between Domestic and Foreign Award:
The key distinction between the two are kinds of award lies in the jurisdiction where the award shall be rendered and enforced and the kind of legal provisions applicable to the said proceeding . In case of a domestic award, the arbitral award shall be made in India for the parties who are nationals of India applying the provision of India Laws and as per the procedure established by the Arbitration and Conciliation Act, 1966. Whereas a foreign award made, can include provision of foreign law and the award can be rendered outside of India where one of the party may be a foreign national.
Categories of Arbitral award:
There are different categories of award as per the specific purpose of the arbitration process, they are
- Final Award: final award refers to the concluding decision rendered by the arbitration tribunal that is legally enforceable and binding. In case if one of the party is not satisfied with the award granted, then an application must be made to the court as per Section 34(3) of the Arbitration and Conciliation Act, to set aside the arbitral award within 3 months of receipt of the award.
- Interim Award: Interim awards refer to temporary measure given before rendering the final decision relating a part or a specific issue that has to be addressed immediately or a clarification that has to sought without which the proceedings cannot proceed further. A party may during the arbitral proceeding may apply to the arbitral tribunal seeking for the required interim measures as per Section 17 of the Arbitration and conciliation Act, 1996.
- Partial Award: Award that addresses only some issues of dispute but not all. It is useful in complex matters where certain claims can be addressed independently.
- Consent Award: Consent award also refers to as settlement award. The Arbitration and conciliation Act as per Section 30 encourages settlement of the dispute of the parties, it also provides that the arbitral tribunal may use mediation, conciliation or other procedures at any time during the arbitral proceedings to encourage the settlement. And if during the proceedings, the parties settle the dispute, the arbitral tribunal shall terminate the proceedings if not objected by the party and shall record the said settlement as an arbitral award based on the agreed terms. Additionally, the arbitration award made through settlement must be in accordance to Section 31 of the Act i.e. Form and contents like a final award rendered.
- Default Award: Default award refers to the ex-parte award granted by the arbitration tribunal upon the absence of the party to the dispute based on the arguments and evidence made by the participating party.
- Additional Award: additional award as the name suggests are the awards made in addition to the final award rendered. The issues and claims that arise after the hearing of the final award are rendered as an additional award complementing the final award.
Enforceability of the award:
Enforcement of Domestic Award:
The domestic arbitral award can be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a decree of the court, three months after the receipt of an award by the award holder. The said period is called an intervention period, the award may be challenged in accordance to Section 34 of the Arbitration and conciliation Act, 1996. After the expiry of the aforesaid period, if the court finds the award to be enforceable, there can be no further challenge regarding the validity of the arbitral award. But if the court is satisfied that the applicant had sufficient cause of action for the delay in making application within the said period of 3 months, the court may entertain the application for an additional period of 30 days but not thereafter.
Prior to the recent amendment of Arbitration and Conciliation, an application for setting aside an award would only amount to having a stay on proceedings for execution of the award. However, by virtue of the Amendment Act, a party challenging an award would have to move a separate application in order to seek a stay on the execution of an award.
Enforcement of Foreign Awards:
Indian is a signatory for the Newy York Convention and Geneva Convention on the execution of the Foreign Arbitral Award . If a party receives a binding award from a country which is a signatory to the said convention and the award is made in a territory which has been notified as a convention country by India, the award would then be enforceable in India. The enforcement of a foreign award in India is a two-stage process which is initiated by filing an execution petition. Initially, a court would determine whether the award adhered to the requirements of the Act. Once an award is found to be enforceable it may be enforced like a decree of that court.
Requirements for Enforcement of Foreign Awards:
- Original award or a duly authenticated copy in the manner required by the country where it is made;
- Original agreement or duly certified copy;
- Evidence necessary to prove the award is a foreign award, wherever applicable.
Section 47 of the Act provides that the above “shall” be produced before the court, at the time of the application for enforcement of the foreign award. However, in a recent Supreme Court Judgement of PEC Limited V. Shipping SDN BHD interpreted that the word “shall” appearing in Section 47 of the Act relating to the production of the evidence as specified in the provision at the time of application has to be read as “may”. It further observed that such an interpretation would mean that a party applying for enforcement of the award need not necessarily produce before the court a document mentioned therein “at the time of the application”. Nonetheless, it further clarified that such interpretation of the word “shall” as “may” is restricted “only to the initial stage of the filing of the application and not thereafter.”
Setting aside an arbitral award:
When the outcome of the arbitration does not satisfy the parties of a dispute, they can approach the court of law to set aside the arbitral award rendered as per Section 34 of the Arbitration and Conciliation Act 1996 only under certain circumstances, they are:
By the application of a party:
Incapacity of the party ie. If he is not a major, a person of sound mind and a person disqualified by law (As per S.11 of Indian Contract Act). An invalid arbitration agreement under the law to which the parties were subjected to the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was unable to present his case. The arbitral dispute was not subject of arbitration or it contains decision beyond the scope of the submission of arbitration. The composition of arbitral tribunal was to in accordance with the agreement of the parties unless the agreement of in in itself was in conflict with the provisions of law. The arbitral award is in conflict with the public policy of India.
By the finding of court:
An arbitral award other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality as appearing on the face of the award.
In case of foreign award:
In the case of foreign awards, the procedure followed in the arbitration has violated the law of the country where arbitration occurred. The foreign award is not yet binding on the parties, or it has been set aside or suspended by a competent authority in the country where it was made or whose law applies.
Research that engages with Arbitral Award
Challenges and appeals to arbitral awards: Volume increases but English Courts remain steadfast
The article “Challenges and appeals to arbitral awards: Volume increases but English Courts remain steadfast” by Norton Rose Fulbright highlights that while the number of applications to challenge or appeal arbitral awards under the UK’s Arbitration Act 1996 (Sections 67–69) has risen significantly, success rates remain extremely low, reaffirming England and Wales’ position as an arbitration-friendly jurisdiction with minimal court interference.
Conclusion:
In conclusion, an arbitral award is the outcome of the arbitration process, where the tribunal delivers its decision on the dispute between the parties. Depending on the circumstances, it can take different forms like a partial, provisional, or agreed award but the purpose remains the same, to provide a fair, final, and binding resolution without needing to go to court. While there are limited grounds on which an award can be challenged, it holds the same authority as a court judgment and can be enforced accordingly. Overall, arbitral award is integral in ensuring the arbitration process is the most efficient way of dispute resolution.