‘Seat’ and ‘Venue’ of Arbitration


Arbitration is one of the most important forms of Alternative Dispute Resolution, wherein two disputing parties in order to resolve the dispute outside of the court by a third party known as the Arbitrator(s) to whom statements of claim, defense and evidence are submitted. The decision is enforceable and binding on both the parties. This method is opted by several parties because of various advantages including- high confidentiality, cost-effective, less time consuming, flexible, party autonomy, right to choose the arbitrators, language, etc. Another reason for choosing Arbitration is that parties get to choose the ‘Seat’ and ‘Venue’ of Arbitration. ‘Seat’ and ‘Venue’ are of great importance in Arbitration and specifically in International Commercial Arbitration matters.

 

In the Arbitration and Conciliation Act, 1996 the term ‘Seat’ is not mentioned. The ‘Seat’ of Arbitration is of vital importance. The ‘Seat’ of Arbitration determines the applicable law which shall govern the Arbitration as well its procedural aspects. This applicable law can be chosen by the parties, however once chosen it cannot be changed. If any award has to be challenged, the same shall be challenged in the courts of the country in which the ‘Seat’ of Arbitration is located. The courts of that country will be the courts who can hear and thereby decide the matter.

 

Under section 20 of the Act, the ‘Place of Arbitration’ is mentioned which shall be chosen on the freedom of parties. This cannot be construed as the ‘Seat’ of Arbitration, rather as a ‘Venue’ of Arbitration as the same is to be determined as per the convenience of the parties for hearing witness, experts, parties, inspection of documents, goods or other properties. Thereby, ‘Venue’ of Arbitration can be any place where the proceedings are held. The ‘Venue’ can also be changed as per the convenience of the parties.

The ‘Seat’ of Arbitration is independent of the ‘Venue’ of Arbitration and will have no effect even if the ‘Venue’ of Arbitration is different or subsequently changes.


Determining the Seat of Arbitration 


In the case of Roger Shashoua v. Mukesh Sharma 2017, the parties had mentioned that the ‘Venue’ shall be London. There was no mention of ‘Seat’ of Arbitration. After the award was passed, it was challenged stating that since no ‘Seat’ was chosen, India should be considered as the same and hence Indian courts should have the jurisdiction. It was finally held that when there is an absence of any express designation of ‘Seat’ of Arbitration, then it is right to agree and conclude that the ‘Venue’ of Arbitration shall also be considered as a ‘Seat’ of Arbitration.

 

This principle was then adopted by the Apex Court in the case of Bharat Aluminium Company and Ors. v. Kaiser Aluminium Technical Services Inc. and Ors. (BALCO), wherein the importance of ‘Seat’ of Arbitration was first discussed in Indian Courts. However, the Apex Court also suggested that it is very essential to differentiate between the terms ‘Seat’ and ‘Place’ of Arbitration and it was advised to mention the ‘curial law’, i.e., the law governing the International Arbitration matter. It was further clarified that choosing ‘Seat’ in another country would mean that law of that particular country only will govern the arbitration, Indian courts cannot then exercise its jurisdiction over the matter. Further, it was in this judgement where the court held that Part I of the act only applies when the ‘Seat’ of Arbitration is India.

 

In the case of Enercon (India) Ltd. v. Enercon GmbH, 2014, the court while deciding whether stating that the ‘Venue’ of Arbitration is London would also mean that the ‘Seat’ of Arbitration is London, held that while determining the ‘Seat’ of Arbitration it is important to see and recognize which country has the closest and most intimate connection with the parties. Since the parties had mentioned Indian Law as the governing or the ‘curial law’ it is important to see this as the ‘Seat’ of Arbitration.

 

In the case of Union of India v. Hardy Exploration and Production (India) Inc.2018, the Supreme Court of India while hearing a matter of challenging arbitral award, propounded that there is a difference between the ‘Place’ of Arbitration and the ‘Seat’ of Arbitration. There was no agreement between the parties stating that the ‘Place’ would also be the ‘Seat’ of Arbitration. Since there was no express statement with respect to this was stated, Indian courts would have the jurisdiction to hear the matter wherein the award was challenged.

 

Looking at the various important decisions stated above, there isn’t anything in the laws that would expressly help in determining the ‘Seat’ of Arbitration. However, the parties while framing an agreement should determine both the ‘Venue’ as well as the ‘Seat’ of Arbitration in order to remove any sorts of ambiguity and unnecessary challenges in the future when the dispute is being heard.


Also read- Vidya Darolia v. Durga Trading Corporation: Complete analysis