Delhi High Court Upholds Enforceability Of Foreign Consent Awards (Nuovopignone International Srl V. Cargo Motors Private Limited [neutral Citation: 2023: DHC: 3818])

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In a significant ruling pertaining to the enforcement of a Foreign Consent Award in ICC Arbitration, the Delhi High Court has clarified the legal status of such awards. The court dismissed the allegation of economic duress and coercion, labeling it as an afterthought, and emphasized that consent awards drawn after obtaining independent legal opinions cannot be treated as unenforceable.

The case involved the enforcement of a Foreign Consent Award, which was met with opposition by the respondents who contended that the award, being passed upon consent, was not enforceable under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Convention/New York Convention). The respondents argued that the award was the result of economic duress and contrary to the public policy of India, rendering it unenforceable under the Arbitration Act.

The Delhi High Court addressed the question of whether the consent award fell within the ambit of the Convention. While the Convention does not explicitly define the term “Arbitral Awards,” the court stated that an award, as recognized by Article I of the Convention, refers to a decision rendered to resolve disputes between parties. The court emphasized that a consent award was not specifically excluded from the Convention, nor did Article V declare that awards based on settlements between parties would be excluded. Therefore, as long as disputes exist, the arbitral process can be triggered, and consent awards can be considered within the scope of the Convention.

The court further highlighted that the Arbitration Act contains specific provisions allowing settlement terms to take the form of an arbitral award. In this case, the parties had agreed that the arbitration would be governed by the ICC Arbitration Rules, which include Article 33 dealing with awards by consent. Referring to the UNCITRAL Model Law on International Commercial Arbitration, the court rejected the argument that consent awards fall outside the scope of the Convention, noting that awards based on settlements are recognized across jurisdictions.

Regarding the allegation of economic duress, the court emphasized that the respondents were adequately represented by counsel throughout the arbitration proceedings. The settlement terms, which were drawn after obtaining independent legal opinions, were clearly recorded in the Settlement Agreement. The court pointed out that the respondents had not raised the plea of economic duress or coercion until filing their objections, and it cited the Privy Council’s decision in Pao On And Lau Yiu Long, which established the conditions for proving duress in contract resiling.

By rejecting the objections raised against the recognition and enforcement of the foreign award, the court has established that consent awards, drawn after obtaining legal opinions, are valid and enforceable.