Foreign Awards: Why Part II Has Two Chapters, and What a Convention Does

In one line

An award made in another country is enforced in India under Part II, which has two separate schemes because India is party to two different treaties on the subject.

In exam wording: Part II of the Arbitration and Conciliation Act 1996 deals with the enforcement of certain foreign awards, Chapter I governing New York Convention awards as defined in section 44 and Chapter II governing Geneva Convention awards as defined in section 53.

The problem a Convention solves

Start with why any of this is necessary.

An award made by a tribunal sitting in Paris has no force in India by itself. India's courts execute Indian decrees; a foreign arbitral award is, to an Indian court, a piece of paper produced by a private tribunal in a country whose law it does not administer.

If that were the end of it, international arbitration would be pointless. A party would win an award and be unable to touch the assets, which are usually in the loser's own country.

A treaty is the answer, and the technique is reciprocity. States agree with one another that each will recognise and enforce awards made in the others' territories, on limited and agreed grounds of refusal. A party then knows before it contracts that its award will travel.

That is what makes arbitration, rather than litigation, the normal way of resolving international commercial disputes. A foreign arbitral award is easier to enforce across borders than a foreign court judgment, because there is no comparable global treaty on judgments. It is worth stating that in an answer, because it explains why so much international business chooses arbitration.

The two Conventions, and why India has both

The Geneva scheme came first. The Protocol on Arbitration Clauses, Geneva, 1923 and the Convention on the Execution of Foreign Arbitral Awards, Geneva, 1927. They are reproduced in the Second and Third Schedules to the Act.

The New York Convention replaced it. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 1958, reproduced in the First Schedule.

The 1958 Convention was drafted precisely because the Geneva scheme did not work well enough, and the central defect it cured is worth knowing by name.

Double exequatur. Under the Geneva scheme, the party seeking enforcement had to show that the award had become final in the country where it was made, which in practice meant obtaining a decision there first and then a second one in the enforcing country. Two rounds of litigation in two countries, and the burden was on the party who had already won.

The New York Convention reversed the burden. The award-holder produces the award and the agreement, and the party resisting enforcement must prove one of the listed grounds. That single change is why the 1958 Convention is one of the most successful commercial treaties ever made.