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Seat of Arbitration versus Venue of Arbitration

The ‘Seat of Arbitration’ refers to the judicial seat of arbitration. It ascertains the law governing the arbitration, procedural requisites and the course of action which are to be adhered. The seat of arbitration is independent of the place or venue of arbitration. The first refers to the judicial seat of arbitration whereas the latter points at the location where it takes place.

In the case, Enercon (India) Limited and Others v Enercon Gmbh, Apex Court of India held that the express mention in the arbitration clause stipulated London as the venue of the arbitration. The stipulation could not lead to the inference that London was held to be the seat as well. Law governing the substantive contract, the law governing the arbitration agreement and law governing the conduct of the arbitration was chosen to be Indian laws.

Two Indian parties electing foreign seat of arbitration

The court in Bharat Aluminium Co v. Kaisar Aluminium Technical Services Inc. clarified that the ambit of Section 28 of Arbitration and Conciliation Act is restricted to the substantive law of contract and will not affect the seat of arbitration.

In GMR Energy Limited v. Doosan Power Systems India Private Limited, the Delhi High Court confirmed that two Indian parties can contract to have a foreign seat of arbitration. Singapore was chosen as the seat of arbitration in the aforesaid case. A foreign seat of arbitration would not result in contravention of Section 28 of the Indian Contract Act, 1872.

It was reiterated in Yograj Infrastructure Limited v. Ssangyong Engineering & Construction that the reference to Singapore and Singapore International Arbitration Centre rules amounts to a choice of Singapore as the seat of arbitration.

Arbitration and Conciliation (Amendment) Act, 2015: Interim Relief

The court in Bharat Aluminium and Co. v. Kaiser Aluminium & Co. held that the Part 1 of Arbitration and Conciliation Act, 1996 was applicable to all arbitrations which take place within India for disputes arising out of arbitration agreements entered into or after September 6, 2012.
However, this position changed with the passing of Arbitration and Conciliation (Amendment) Act, 2015. Section 2(2) of Act was amended by the addition of proviso thereby giving recourse to interim relief in respect of arbitral proceedings held outside India unless expressly waived by the parties. If the proceedings are governed by foreign law, the same would not bar the courts from providing interim relief. Courts possess the power to grant interim relief only with respect to matters where arbitral tribunal has not been constituted. Following the constitution of the arbitral tribunal, the court can entertain interim relief only where circumstances are such that they render remedy given under section 17 of the Act inefficacious. Another outcome of the 2015 Amendment is that the option of seeking interim order is not available to two Indian Parties who chose to arbitrate outside India.

On 10th October 2019, the Delhi High Court in Dredging Corporation of India v. Mercator Limited held that the parties only agreed to change the venue of arbitration from London to Delhi, but the seat remained unchanged. The arbitration was governed by the Arbitration Act, 1996 (London) thereby rendering Part1 of the Act inapplicable. The court lacked the jurisdiction to entertain a petition under section 24 of Arbitration and Conciliation Act, 1996.

It can be safely concluded that through a series of judgements, the courts have time and again clarified that the terms, “Seat of Arbitration” and “Venue of Arbitration” posses discrete nature and functions in the proceedings.

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