In a recent administrative event on 19th march, 2012 India has declared that Arbitral Awards passed in China (including Hong Kong and Macau) will be recognized and enforced in Indian Courts.
Arbitration in Asia-Pacific has gained popularity over Europe and United States owing to escalating investment in and out of Asian Countries. Recognizing the growing importance of International Arbitration as an undisputed means of resolving international commercial disputes, Indian Ministry of Law and Justice has affirmed that Arbitral Awards passed in People’s Republic of China (including special administrative regions of Hong Kong and Macau) on or after 19th march, 2012 may be recognized and enforced in India. This decision will add another state to the list of already existing 44 “Gazetted-States”, the Arbitral Awards of which are recognized and enforceable in India. An International Arbitral Award to be recognized & enforced in India ought to be passed in a State notified via Government of India Official Gazette. This condition flows from Section 44 of Arbitration & Conciliation Act, 1996. Hence even if an Arbitral Award is passed in a Country which is a signatory to New York Convention, 1958 it would not ipso facto mean that it would be enforceable in India. The enforcement of Awards passed in Arbitration proceedings seated outside the territory of India is governed by Arbitration and Conciliation Act, 1996. The Act is modeled on United Nation Commission on International Trade Law (UNICTRAL) model law.
India is a party to New York Convention, 1958. It became a party to the New York Convention, 1958 on 10th June, 1958 and ratified it on 13th July, 1961.The main aim of this Convention is recognition & enforcement of Arbitral awards passed in the contracting state should not be discriminated and obliges the parties to ensure that such awards are recognized. Presently 146 States are party to the New York Convention, 1958 out of which only 44 States have been Gazetted by Government of India. China is also a signatory to Convention on Recognition and Enforcement of Arbitral Awards (New York Convention, 1958) but it was absent from the list of gazetted territories till now. This was considered to be an incongruity amongst the Arbitral community.
IMPACT ON INDO-CHINESE TRADE RELATIONS
The unparalleled level of trade between India and China has reached an all time high. Indo-Chinese bilateral trade has cropped up from being as low as US $ 2.92 Billion in the year 2000 to US $ 73.9 Billion in the year 2012 making China largest trading partner of India1. The trade between India and China is expected to touch US $ 100 Billion by the end of 2015. After the announcement of gazetting China, Sino-India trade is expected to prosper and create new benchmarks in trade relations between India & China. This step taken by the Indian Government will have a constructive effect on the ever so affluent trade between the two countries. Prior to the notification, entrepreneurs from China and India selected Singapore (Singapore International Arbitration Centre) as the preferred seat of Arbitration as China was absent from the list of gazetted states as also fearing the non recognition of Arbitral Awards in India. Now there will be a more evenhanded choice for those deciding between Hong Kong International Arbitration Centre (HKIAC) & Singapore International Arbitration Centre (SIAC). Apart from SIAC & HKIAC there is another well recognized Arbitration Institution in Asia called CIETAC (“China International Economic and Trade Arbitration Commission”). CIETAC is the leading and busiest Arbitration Institution in China having its Headquarters in Beijing.
HKIA & CIETAC : EVOLUTION
HKIA Administered Arbitration Rules are based on UNCITRAL model law which has also inspired the Indian Arbitration & Conciliation Act, 1996. Following the notification, Hong Kong International Arbitration Centre was quick to spot the implications of the notification and HKIA’s General Secretary Chiam Bao commented in a press event that “with Sino-Indian trade on increase, this long awaited clarification is welcomed by the Hong Kong’s Arbitration Community. We look forward to showcasing India the many attractive features that Hong Kong has to offer as a seat of Arbitration”. HKIAC has also announced revised Administered Arbitration Rules (the “2013 HKIA Rules”) to ensure their suitability to mounting complexities in International Arbitration Disputes. Key changes to the existing Arbitration rules include.
- ability to handle multi-party & multi-party disputes,
- improvements on expedited procedure,
- improved terms and conditions to stream line the Appointment of Arbitrator process and
- provision for emergency relief in cases of urgent nature2.
The revised HKIA Administered Arbitration Rules will come into force on 1st November, 2013. Revised HKIA Rules and state-of-the-art facilities and exceptional infrastructure will definitely give a tough competition to Singapore as a seat of Arbitration in the disputes involving Indian parties.
Similarly CIETAC has also come up as an Arbitration friendly Institution with the adoption of revised Arbitration Rules which came into effect from 1st May, 2012. Some noteworthy changes to the CIETAC Arbitration Rules include -
- provision for consolidation of parallel proceedings to be consolidated into a single Arbitration proceeding,
- removal of the provision making Chinese as a default language of Arbitration and
- ability to choose an arbitral seat which could be a city outside mainland China3.
These changes will be welcomed by the Indian parties which used to prefer Singapore as a seat of Arbitration over China and Hong Kong. The change in the CIETAC Arbitration Rules and recognition of its awards in India can revolutionize the ubiquitous trend of choosing Singapore International Arbitration Centre (SIAC) and the parties may be attracted towards CIETAC while choosing a seat of Arbitration when one of the parties is from Singapore to endorse neutrality.
The recognition and enforcement of Arbitral Awards passed in China will prove to be an encouraging development for Indian parties engaged in International Trade with Asian Country. This will prove to be a blessing for the Indian parties in conflict with Singaporean entities as now they have a viable substitute to Singapore International Arbitration Centre (SIAC). In cases of Multi party Contract, HKIA & CIETAC will not be excluded as a seat of Arbitration only on the basis of non-recognition of Awards. The Hong Kong and Chinese Governments must take advantage of this development to exterminate the domination of Singapore International Arbitration Centre (SIAC) as a preferred seat of Arbitration and elucidate the implications of the notification to the users of Arbitration. Only time will tell if China/Hong Kong will be able to capitalize on this key opportunity and attract parties with Arbitration disputes.