As we have previously reported, the Indian Supreme Court in Bharat Aluminium Company and Ors v Kaiser Aluminium Technical Service, Inc. and Ors ("BALCO") overruled the previous law regarding the applicability of Part I of the Arbitration and Conciliation Act 1996 (the "Arbitration Act") to foreign-seated arbitrations. However, in doing so, the Supreme Court held that the judgement was to only apply prospectively and did not apply to agreements entered into before the date on which its judgment was handed down (6 September 2012).
A recent judgment of the Bombay High Court in Konkola Copper Mines (PLC) v Stewarts Lloyds of India Ltd ., has held that even though the decision in BALCO was only to apply prospectively, reasoning contained in the decision and the interpretation provided to certain sections of the Arbitration Act should be applicable even in respect of arbitration agreements entered into prior to 6 September 2012.
Konkola Copper Mines (PLC) ("Konkola"), a company incorporated under the laws of Zambia, and Stewarts Lloyds of India Ltd ("Stewarts") were involved in ICC arbitration proceedings in which a partial final award had been passed by the tribunal in favour of Konkola.
The relevant arbitration clause provided that the venue of the arbitration would be New Delhi. Thereafter, once the arbitration commenced, the parties mutually agreed that the place of arbitration would be Mumbai.
Upon receiving the award from the tribunal, Konkola filed an application in the Bombay High Court for interim relief under Section 9 of the Indian Arbitration Act seeking security from Stewarts and an injunction to prevent Stewarts from dissipating its assets.
The issues before the court were:
- whether the place of arbitration was New Delhi or Mumbai;
- whether the courts situated in the place of arbitration have jurisdiction to entertain a Section 9 application notwithstanding that the cause of action may have accrued elsewhere; and
- whether the statement in BALCO, to the effect that courts of the place of the arbitration have jurisdiction under section 2(1)(e) of the Indian Arbitration Act, is declaratory of the law (and therefore applicable to all arbitration agreements) or applicable prospectively only.
Decision of the Court
The Bombay High Court held that the place of arbitration had been modified by the parties to be Mumbai and that parties are at liberty even after the arbitration commences to amend the place of arbitration that had been originally chosen.
The High Court went on to hold that although the judgment of the Supreme Court in BALCO primarily dealt with the issue of whether Part I of the Arbitration Act applied to foreign seated arbitrations, it also considered various other terms of the Arbitration Act, such as, section 2(1)(e) of the Arbitration Act and provided guidance as to how these provisions were to be interpreted.
The Court held the Supreme Court's decision to apply Part I of the Arbitration Act only to arbitration seated in India was intended to be prospective in application, but it would not be appropriate to hold that all the reasoning in the judgment would also be applied prospectively only. On this basis the court held that since the Supreme Court in BALCO had interpreted Section 2(1)(e) in a certain manner, such an interpretation was binding.
Applying the Supreme Court's interpretation of Section 2(1)(e) in BALCO, the court held that Section 2(1)(e) contemplated providing jurisdiction to two courts i.e. the court of the place where the cause of action arose and the court of the place where the arbitration takes place. Thus, the Bombay High Court had jurisdiction to hear the matter.
This decision is significant in that it has provided some guidance in the debate surrounding how the various statements of principle and reasoning in BALCO may be applied by the courts in cases where the agreement in question was entered into prior to the date of the decision. The helpful pro-arbitration reasoning which underpins the BALCO decision, therefore, may be drawn upon by the courts when considering other issues that may arise in respect of arbitration agreements entered into before 6 September 2012, as well as after.