India has declared that arbitral awards made in China (including Hong Kong and Macau) may be recognised and enforced by Indian courts. This will increase the appeal of arbitration centres in China, and in particular Hong Kong, in the context of disputes with an Indian connection.

The Indian Ministry of Law and Justice has declared that arbitral awards made in China (including Hong Kong and Macau) may be recognised and enforced by Indian courts. The forthcoming addition of China to India’s official list of so-called “gazetted” States will increase the appeal of arbitration centres in China, and in particular Hong Kong, in the context of disputes with an Indian connection.

Recognition and Enforcement of Arbitral Awards in India

India and China are both parties to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), which requires that Contracting States recognise and enforce arbitral awards made in other States, subject to the declarations and reservations of Contracting States (the most relevant reservation for present purposes being the “reciprocity reservation”, by which States only agree to recognise and enforce awards made in other States which give reciprocal treatment to their awards).

The Indian Arbitration and Conciliation Act 1996 (the Act) governs the enforcement of “foreign awards” by Indian courts. The Act requires the Central Government, via a notification in the Official Gazette, to specify (or gazette) a State (as giving reciprocal treatment to awards made in India) before an arbitral award made in that State will be recognised and enforced by Indian courts. Of the 146 parties to the New York Convention, currently only 44 have been gazetted.

China Will Finally Be Gazetted

The absence of China from the list of gazetted States was widely considered to be an anomaly by the international arbitration community. On 19 March 2012, the Indian Ministry of Law and Justice issued a notification declaring that it would add China (including Hong Kong and Macau) to the list of gazetted States. This notification is expected to be published in the Official Gazette shortly. Upon such publication, arbitral awards made in China, Hong Kong and Macau on or after 19 March 2012 may be recognised and enforced by Indian courts.

Implications

This development coincides with an unprecedented level of trade between India and China, which has risen from US$61.7 billion in 2010 to a record US$73.9 billion in 2011. India and China have expressed clear intentions for this to increase and have set a bilateral trade target of US$100 billion for the year 2015.

In light of India’s notification, the appeal of China and in particular of Hong Kong as an arbitration centre for disputes with an Indian connection will increase. Consequently, there will be a much more evenly balanced choice for those deciding between the two popular Asian arbitration centres of Hong Kong and Singapore (which was gazetted some time ago) and the institutions based in those two jurisdictions: the Hong Kong International Arbitration Centre (HKIAC) and the Singapore International Arbitration Centre (SIAC).

The HKIAC is currently undergoing an initiative to amend its Administered Arbitration Rules to ensure their suitability for increasingly complex international arbitration disputes. The HKIAC is also engaged in an extensive refurbishment of its premises to provide state-of-the-art facilities; the grand opening of which will follow this year’s ADR in Asia Conference, which is being held in Hong Kong in October 2012. These developments, and India’s notification, will offer users of arbitration services a viable alternative to SIAC for arbitrations with a connection to India.

The HKIAC has historically been, and currently remains, more popular for parties outside of China than the principal arbitration centre in mainland China, the China International Economic and Trade Arbitration Commission (CIETAC, also known as the Court of Arbitration of the China Chamber of International Commerce). However, CIETAC, headquartered in Beijing, has recently increased its efforts to appeal more widely to those outside China. These efforts include the adoption of new arbitration rules, which came into effect on 1 May 2012 and seek to conform with the current practice of international arbitration and reflect recent changes to the rules of other major arbitration centres. Some of the more significant changes to the CIETAC rules include the provision of flexibility for CIETAC to choose a non-Chinese arbitral seat if appropriate and the removal of the provision making Chinese the default language of an arbitration. The new CIETAC rules and the recognition and enforcement of its awards within India may result in parties being more attracted to CIETAC when selecting an arbitration centre.

Conclusion

The recognition and enforcement of arbitral awards made in China and Hong Kong in the Indian courts is an interesting development for international arbitration and is representative of the deepening economic ties and relationship between the two States. However, the extent to which Chinese arbitration institutions, particularly HKIAC and CIETAC, will attract parties with arbitration disputes connected to India remains to be seen.