Feb, 15 2024

Section 2(7) of the Arbitration Act 1996 states that ‘an arbitral award made under part-I shall be considered as domestic award.’ A domestic award therefore must result from an arbitration held in India, in accordance with provision of part-I of this Act. Given the scheme of the Act, Part-I would apply only to cases where the place of arbitration is in India. Section 2(2), mandates that part-I shall apply where the place of arbitration is in India.

Section 2(7) provides that an arbitral award made under part-I of this Act shall considered as a domestic award. This implies that if the place of arbitration is in India then as per Section 2(2) of the Act, the arbitral proceeding will be governed by the provision of part-I of the arbitration Act.

In Centrotrade Mineral and Metal Inc v. Hindustan Copper Ltd.[1] the issue arose before the Supreme Court whether an award passed by ICC arbitrator in London could be considered to be a domestic award since the arbitration agreement was governed by Indian laws. The court held that in view of sub section 2 and 7 of section 2 read with section 44 of the Act the award passed by the ICC arbitrator was not a domestic award. Sub section 7 of 2 provides that an arbitral award made under part-I shall be considered as domestic award.

So, domestic award means an award made under territory of India and it also includes International arbitration award[2], where one party is other than India on any citizen, government or institution other than India but award made in territory of India.

Domestic award is a result of domestic Arbitration. the term domestic arbitration has been used by the act in several places but the act did not define the same. The same has been defined by the Arbitration and Conciliation Amendment Bill in the following words:

 

“Domestic Arbitration” means an Arbitration relating to disputes arising out of legal relationships, whether contractual or not, where none of the parties is –

(i)         an individual who is a national of or habitually resident in any country other than India; or

(ii)       a body corporate which is incorporated in any country other than India; or

(iii)     an association or a body of individuals whose central management and control is exercised in any country other than India; or

(iv)      the Government of a foreign country, where the place of arbitration is in India and shall be deemed to include International Arbitration and International Commercial Arbitration where the place of arbitration is in India.

 

In the process of domestic arbitrations in India, the applicable law is the law of India. This is a mandatory requirement under the Indian Arbitration Act and cannot be contracted out of by the parties.[3]

For international arbitrations with a seat in India, the arbitral tribunal shall follow the laws the parties have agreed to apply to the substance of their dispute.[4]

The designated law or legal system applying to the substance of the dispute is to be construed, unless expressly agreed otherwise, as referring to the substantive law of that country and not its conflict of laws rules.[5]

In the absence of any agreement between the parties as to the applicable law, the arbitral tribunal shall apply the laws that it considers to be appropriate and relevant to the dispute.[6]

Furthermore, the arbitral tribunal may decide the applicable law by using the terms of any contract between the parties, taking into account the usages and trade practices applicable to that contract.[7]

 

 

 

 

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[1] (2006) 11SCC 245

[2] Section 2 (1)(f) of Arbitration and Conciliation Act 1996

[3] S 28(1)(a), Ibid

[4] S 28(1)(b)(i), Ibid

[5] S. 28(1)(b)(ii), Ibid.

[6] S. 28(1)(b)(iii), Ibid.

[7] S. 28(3), Ibid