In a landmark decision in September 2012, the Constitutional Bench of the Supreme Court of India overruled its earlier controversial decision in Bhatia International v. Bulk Trading SA. In the case of Bharat Aluminium v. Kaiser Aluminium, the five-judge panel held that Part I of the Indian Arbitration and Conciliation Act 1996 (“IACA”) will not apply to international commercial arbitrations which have their seat outside of India.
In Bhatia International, the court had previously interpreted Section 2 of the IACA so as to enable Part I of the IACA, which provides for remedies such as interim relief or setting aside of arbitral awards, to be applied even where the seat of arbitration was outside of India. This interpretation was widely criticized as having too wide an impact on foreign arbitrations and for creating uncertainty among parties to an arbitration.
The five-judge panel in Bharat Aluminium reconsidered whether it was reasonable for Part I of the IACA to be applied to arbitrations held outside of India.
In addition to overruling the earlier decision of Bhatia International, the Supreme Court of India held that:
- Part I of the IACA would only apply to arbitrations seated in India;
- Awards which are rendered in foreign seated arbitrations will only be subject to the jurisdiction of the Indian courts when they are sought to be enforced in India under Part II of the IACA;
- Indian courts cannot order interim relief in support of foreign seated arbitrations; and
- The decision of Bhatia International will continue to apply to any arbitration agreements entered into before 6 September 2012.
The decision of the Supreme Court of India has been welcomed by the international arbitration community because it limits the intervention of the Indian courts in arbitrations seated abroad. Nonetheless, as the decision in Bharat Aluminium will only apply to arbitration agreements entered into after 6 September 2012, the Bhatia International legacy will live on for a number of years.