Arbitration has become an increasingly popular method of resolving disputes in recent times, and various institutions have emerged to support the pro-arbitration regime and make the process more transparent and proper. These institutions offer a set of rules for parties to agree to be governed by in case of any future disputes that may require arbitration.
In India, the Arbitration and Conciliation Act, 1996 has undergone significant developments with regards to the applicability of institutional rules of arbitration between parties. The Supreme Court in the landmark BALCO case (Bharat Aluminium Company & Ors. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552) and the recent
Amazon’s case (Amazon Seller Services Pvt. Ltd. v. Prabhu Parakh & Ors. (2021) SCC Online SC 793) has recognized the sanctity of these rules, meaning that parties cannot go back on their agreement to be governed by the rules of an institution.
Can Institutional Arbitration Rules be challenged before Tribunal?
Arbitral tribunals have the power to rule on their own jurisdiction, as recognised under the principle of Kompetenz Kompetenz. However, this principle only pertains to the validity of the contract, and not the rules of an institution. The rules of an institution can only be challenged before the court of the place where the seat of arbitration exists.
Can a foreign arbitral award be challenged in India if the Institutional Rules are opposed to public policy of India?
If the juridical seat is based outside India, an arbitral award cannot be challenged under Section 34 of the Arbitration and Conciliation Act, 1996. This is because Part I of the Act does not apply to international commercial arbitrations. If the parties have agreed that the juridical seat is outside India, then the enforcement of such an award will depend on the public policy and laws of India.
In conclusion, the Supreme Court of India has consistently upheld the significance of institutional rules of arbitration and their binding nature on parties. However, if the rules are opposed to public policy, the same cannot be enforced in India. In case of foreign arbitral awards, the enforceability will depend on the jurisdiction of the seat of arbitration and its consistency with the public policy and laws of India.
