Indian Supreme Court Rules That Indian Courts Have Jurisdiction To Hear An Application To Set Aside An Award Issued In Malaysia

In its recent decision in Union of India v Hardy Exploration and Production (available here), the Supreme Court of India found that a contractual clause stipulating Kuala Lumpur as the 'venue' of arbitration did not amount to a choice of juridical seat. While the Indian courts' jurisdiction to hear set-aside applications will be excluded if the seat of the arbitration is outside India, the Supreme Court found that in this case there was no chosen seat (and the tribunal had not determined a seat), notwithstanding the choice of Kuala Lumpur as the venue for the arbitral proceedings, and the fact that the award was signed in Kuala Lumpur. Since this was a case where the arbitration agreement pre-dated 6 September 2012 (the date of the key Supreme Court ruling in BALCO), it appears that the Court did not find it necessary to positively determine that the seat was in India; the fact that an overseas seat had not been established appears to have been sufficient for the Indian courts to have jurisdiction to hear the application.

Background

On 2 February 2013, Hardy Exploration and Production (India) Inc ("Hardy") obtained an arbitration award (the "Award") in excess of £70 million against the Union of India ("UoI").1 The dispute arose from a production sharing contract dated 19 November 1996 (the "PSC"), and related to oil and gas exploration rights in Indian territorial waters.

UoI challenged the Award by filing a set-aside application under Section 34 of the (Indian) Arbitration and Conciliation Act 1996 (the "Act") before the Delhi High Court. Hardy resisted this application on the basis that the Indian courts did not have jurisdiction to decide the set-aside application as the seat of the arbitration was Kuala Lumpur, Malaysia. Article 33 of the PSC contained the arbitration agreement, and Article 33.12 provided that:

"The venue of conciliation or arbitration proceedings pursuant to this Article unless the parties otherwise agree, shall be Kuala Lumpur..."

UoI argued that Kuala Lumpur was merely the physical venue where the arbitration was conducted and the award was signed, and the application of Part I of the Act (which includes Section 34) was not excluded by the parties.

The Delhi High Court found that since the Award was made and signed at Kuala Lumpur, and there was no indication of any dispute between the parties regarding the seat of the arbitration, it could be inferred that Kuala Lumpur was the seat. As a result, the Indian courts were found to have no jurisdiction under the Act. UoI appealed the decision before the Supreme Court.

Hardy's enforcement action in US courts

Separately, in 2016, Hardy also filed a petition for enforcement of the Award before the United States District Court for the District of Columbia ("US District Court"). In response, UoI argued that the US District Court should decline to enforce the Award as doing so would violate US public policy, and in any event, the court should stay the enforcement...

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