Choice of Seat & Venue in Dispute during Arbitration

OBJECTIVE

The blog discusses the question of choice of seat or venue in dispute all through arbitration. It attracts the attention of our readers’ on how the seat of arbitration conspicuously diverges from the venue of arbitration. This blog highlights the recent position of law decided by the Apex court of the country with regard to the determination of the seat of arbitration and provides the discrepancy between seat and venue of arbitration. Moreover, it establishes some of the remarkable controversies which came into the scene while deciding the seat of arbitration.

INTRODUCTION

“Alternative Dispute Resolution provides scientifically developed techniques to our independent Judiciary and reduces the burden of the courts.”[1] In India, the matter related to Arbitration has without any suspicion observed a huge number of controversies about various facets of the Arbitration and Conciliation Act, 1996. The seat of arbitration is an area/place selected by the parties as to the legal venue of[2] arbitration. The term “place of arbitration” has been used instead of the phrase “seat” and “venue” in the Arbitration and Conciliation Act,1996, and this expression is used under section 20 and section 28 of the above-mentioned act.

NOTABLE CONTROVERSIES

1. The applicability of part 1 of Arbitration and Conciliation Act, 1996 to internationally seated arbitration consensus, further it was initiated from Bhatia International v. Bulk Trading S.A. (2002)4 SCC 105. Later on, it was settled by the Apex Court in 2012 in Bharat Aluminium Company Ltd. V. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC 552.

2. Other controversies include the theme of Arbitration of dispute till the judgment of the Apex Court in Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd & Ors (2011) 5 SCC 532.

3. The Arbitration related to fraud claims was in continuation since last decade and finally settled by the Court of last resort in A. Ayyasamy v. A. Paramasivam (2016) 10 SCC 386.

4. The trendy controversy that received considerable importance is the seat-venue conundrum or you can say the courts are somehow confused or they face difficulty in regulating the seat of arbitration.

The Court of last resort on various occasions has propounded seminal judgment on seat, venue, place of arbitration, still, it seems to be the room full of ambiguity.

ASPECT AND IMPORTANCE OF CHOOSING A SEAT

The “seat of arbitration” plays a vital role in any arbitration proceeding. It not only mentions where an institution is based, the hearing will be held or where there may be a good pool of arbitrators but it also mentions which court has supervisory power over your arbitration dispute and further it substantiate the extent of those powers. When parties decide to arbitrate then the very crucial decision they have to make is to choose a seat of mediation. But they need to consider few important factors while choosing a seat for mediation.

By fixing the ‘seat of arbitration, the country establishes a legal relationship between the arbitration on one hand and the arbitration rule and the courts on other hand. The seat of mediation must not be recognized in a realistic or traditional mode. Rather, it’s a technique that provides a formal legal domicile of the mediation. Every mediation is concerned with some legislative and executive rule. The “seat” should not be disordered with the physical spot of the hearings.

The party anyway is free from any external force to agree upon the seat of mediation. But there are some rare arbitration rules under which the choice of the parties is limited. When the parties fail to agree, then the venue or seat may be determined by the arbitral tribunal. Some practical aspects apart from legal aspects can be considered while choosing a seat for mediation, similarly- the role and attitude of the local courts in terms of direction and management, ease to transport, and acceptable facilities.

DISTINCTION BETWEEN SEAT AND VENUE OF ARBITRATION

The seat or venue of adjudication is the ‘spot’ or you can say ‘situs’ of adjudication, where the mediation or adjudication is[3] anchored. Selecting a certain location as a “seat of arbitration” will bring consequences. The selection of geographical location as a seat means that the judicature of that area will have supervisory jurisdiction over the arbitral process. Procedural law and crucial rule of the proceeding will be the convention or law of that jurisdiction.

The term ‘seat’ is distinguished from the term ‘venue’ and ‘place’. The expression “seat” is very crucial in determining the aspects of the arbitration proceeding. The term seat is being called the center of gravity of the adjudication proceedings.

The seat of mediation is independent of the place or venue where the mediation process occurs. The court of seats has supervisory authority over the mediation process. The seat selection determines the law governing arbitration procedure and often, more importantly, the process and rights relating to the enforcement of adjudication award.

The term ‘venue’ may be interlined with the term ‘seat’, but this approach ought not to be the veracious or true approach. The term ‘place’ frequently applies to a convenient place chosen by the parties to execute the mediation proceedings and should not be bewildered with the seat or venue.

OPINION OF THE LEGAL FRATERNITY

According to Supreme Court, in Mankatsu Impex- Another deviation, the apex court had the opportunity to revisit the issue of seat and venue in the matter of Mankatsu Impex. The court, in this case, was mediating a controversy that arose out of a memorandum of understanding which expressed that the MoU is ruled by laws of India and courts in the country’s capital will have jurisdiction. The dispute will be referred to and finally concluded and decided in Hong Kong. The matter was what will be the seat or location of arbitration.

In Hardy Exploration and Production (India) Inc. (2019) 13 SCC 472, the court decided that “the parties had not selected the seat of adjudication and the adjudication tribunal had also not determined the venue of arbitration.” The venue could not by itself suppose the status of the seat; instead, a venue could become the seat if “something else is affixed to it as an attendant.” The Apex court, therefore, held that our country’s courts had the authority to hear the challenges to the award. The decision of the Hardy Exploration case is of limited help because it does not delineate the notion of “seat”, “place” and “venue” and because it does not identify the additional factors needed to justify treating the chosen venue as the seat of arbitration. Through this decision, the court of the last record eventually did not provide any clarity over this matter except the simple conclusion that a chosen venue might not be attended as the seat of adjudication in the absence of supplementary [4]factors indicating that such chosen venue was planned to be the seat of mediation.

In the case BGS-SGS-Soma-JV-Shashoua principle reiterated, the court of the last record deduced that “when a section or clause delegates a venue of arbitration and proclaims that the venue of arbitration will be held at the similar place, it specifies that the venue[5] is eventually of arbitration- New Delhi or Hong Kong.”

CONCLUSION

Analyzing the above-mentioned facts, it can be inferred, the ‘seat of arbitration determines the applicable laws that govern the Arbitration which includes the procedural aspects. Renowned scholars describe the law of seat as the lex arbitri. Many arbitration jurisdictions emphasize upon the seat of arbitration, just to determine the lex arbitri and initiate a territorial link between the arbitration hearings or proceeding and the ‘seat of arbitration.

~ PRITY KUMARI

REFERENCES:

[1] Anubhav Panday, 9 May,2017, Alternative Dispute Resolution, All you need to know about ADR (last visited-14 Aug,2021, 9:35 pm) https://blog.ipleaders.in/adr-alternative-dispute-resolution/ [2] Determination of seat of arbitration and its significance, published on 19 March,2019 (last visited-14 Aug,2021, 10:30 pm) https://law.asia/determination-seat-arbitration-legal-significance/ [3] “commentary to Trans-Lex Principle, para-2, (last visited-14 Aug,2021, 9:00 pm) http://www.trans-lex.org/969040/_/seat%20of%20arbitration [4] Anjali Anchayil and Asutosh Kumar, Choice of seat or venue: Supreme Court of India Dithers, Kluwer Arbitration Blog (last visited-15 Aug, 2021,2:11 pm) http://arbitrationblog.kluwerarbitration.com/2020/05/13/choice-of-seat-or-venue-supreme-court-of-india-dithers/ [5] Roopadaksha Basu, The seat v/s. venue Debate-A Continuing Saga, Mondaq (last visited-15 Aug,2021, 1:41 pm) https://www.mondaq.com/india/arbitration-dispute-resolution/957918/the-seat-vsvenue-debate-a-continuing-saga