The Supreme Court of India, in a judgement dated the 7 November 2024, made a ruling on the determining criteria for the seat of arbitration in an international commercial arbitration where the arbitration agreement does not specifically provide for such seat.
The petition was filed by a distributor incorporated in Afghanistan against the Micromax group companies, an Indian mobile phone manufacturer. The parties had entered into a distribution agreement in 2020 wherein the petitioner was appointed as an authorized distributor of Micromax products in Afghanistan. The agreement also provided that all disputes would be adjudicated by arbitration subject to the UAE Arbitration and Conciliation Rules with the venue in Dubai, UAE. The agreement also provided that the governing law would be the laws of the UAE and subject to the non-exclusive jurisdiction of UAE courts.
A dispute arose between the parties which led to the petitioner issuing a notice invoking arbitration under the Indian Arbitration and Conciliation Act 1996 (“Arbitration Act”). In this notice, the petitioner also stated that since the agreement did not confer any exclusive jurisdiction on any specific court and as the cause of action had arisen in both Afghanistan and India, that the dispute would be subject to arbitration under the jurisdiction of Indian courts.
The Supreme Court, in its judgement, delved into the history of jurisprudence on the issue of the applicability of provisions of the Arbitration Act to international arbitrations. The Supreme Court stated that the prevailing position is that provisions of the Arbitration Act would only apply when the arbitration is held in India, i.e. when either the seat of arbitration is in India, or the law governing the arbitration is Indian law.
The Supreme Court then discussed the test for determining situations of conflict between the ‘venue’ and ‘seat’ of arbitration. As per the Supreme Court, when a place is designated as a ‘venue’ in an arbitration agreement, it is effectively the ‘seat’ of arbitration as well, provided that (i) the agreement only designates one such place; (ii) there must be no scope of change of such place; and (iii) there must be no other significant indications which show that the designated place is just the ‘venue’ and not the ‘seat’ of arbitration.
Given the above principles and the facts of the case, the Supreme Court held that the ‘seat’ of arbitration in the present case would be UAE and not India. Additionally, the Supreme Court held that even if the seat were India, the Arbitration Act would not be applicable given the prevailing jurisprudence on its applicability to arbitrations not held in India. The Supreme Court also stated that as per the doctrine of forum non conveniens (inconvenient forum), UAE courts would be a more effective forum for adjudication of the present dispute as the seat of arbitration is the UAE and the agreement is governed by the laws of the UAE. In light of these factors, the Supreme Court dismissed the petition.
Disha Mohanty, IDI Country Expert for distribution in India
Shivalik Chandan
