Enforcing Foreign Judgement and arbitration awards

Enforcing Foreign Judgement and arbitration awards

Arbitartion Awards – Governments in Asia and other thirdworld.

Since the last decade, governments in Asia and other thirdworld areas have embarked on and initiated bold reforms to liberalise their economies. This has meant larger and keener interaction by local businesses with their counterparts in the industrialised nations for cross-border trade and investment. For the northern hemisphere nations, the developing countries have come to represent a huge untapped market, natural resources, cheap workforce – and also political risk, judicial uncertainty and immaturity, nationalism and different cultures

The seller, manufacturer, supplier or agent in any part of the world, when dealing with a counterpart outside his country, keeps three issues in mind –

that both parties perform their respective contractual obligations

that no disputes arise between the parties – and if they do, with all commercial adjustments, they are amicably resolved

in a worst-case scenario, he/she is able to retain the right to have the dispute determined by a court/tribunal at home, as against in a foreign country

This business sentiment has been typical in India since globalisation and “opening-up-the-economy” reforms commenced in mid-1992. Business in all its varieties has started booming – and the documentation, often drafted and settled by foreign attorneys, has come to include the clause choosing the “foreign law” – contracts expressly specify that in the event of disputes, the governing law should be the law of the foreigner and courts of that country or a neutral arbitration tribunal should have jurisdiction to decide them. Even the venue of arbitration is invariably that foreign country. The foreigner thus feels comfortable, knowing that the law and arbitrator/court with which he/she is most familiar will be charged with the dispute – a sort of consonance considering the other risks involved

While getting the other party to agree to a favourable governing-4aw and jurisdiction clause is half the battle won (the regulatory and judicial authorities in India have interfered, often affecting the right of parties to choose an appropriate governing law), enforcing the final award/ judgment is often a hassle in itself

On the international plane, therefore, nations attempt to project their “investor-friendliness” by enacting local legislation aimed at easing the enforcement of foreign judgments and awards – impartially, promptly and at a reasonable expense. As a vital emerging market, India has such a legislation in place. It is the purpose of this article to discuss this bundle of procedural laws for the benefit of the readers


The prime law of India is that where there is an express agreement to,submit to the jurisdiction of a foreign court, a judgment pronounced by such court binds the parties, and effect will be given to such ajudgment in Indian courts. The governing legislation for judgments pronounced by foreign courts is the Code of Civil Procedure 1908 (“the Code”)

Section 2(6) of the Code defines a “foreign judgment” to mean any judgment of a foreign court. Section 2(5) of the Code defines a ‘foreign court’ to mean a Court outside India and not established or continued by the authority of the Central Government (of India)

In other words, a foreign judgment means an adjudication by a foreign court on a matter before it. A judgment given by a foreign court does not cease to be so when, as a consequence of political change, the territory where the court was situated at the time of the judgment becomes part of India

Such a judgment, for the purposes of enforcement and execution, will be conclusive, that is, it will be recognised and will operate as resjudicata (also fulfilling the conditions of it) save in certain exceptional cases. These are mentioned in section 13 of the Code which reads as follows –

A foreign judgment shall be conclusive as to any matter thereby directly adjudicated upon between the same parties or between parties under whom they or any of them claim litigating under the same title, except –

where it has not been pronounced by a Court of competent jurisdiction

where it has not been given on the merits of the case

where it appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal to recognise the law of India in cases in which such law is applicable

where the proceedings in which the judgment was contained are opposed to natural justice

where it has been obtained by fraud

where it sustains a claim founded on a breach of any law in force in India [an example of this would be a foreign judgment for a gambling debt]

The foreign court must be competent to try the suit, not only as regards pecuniary limits of its jurisdiction and the subject-matter of the suit, but also with reference to its territorial jurisdiction, and the competency of the foreign court is to be judged not by the territorial law of the foreign state, but by the rules of private international law

Undoubtedly, the foreign court has jurisdiction to deliver a judgment in rem which may be enforced or recognised in an Indian court, provided that the subject-matter is within its jurisdiction. It cannot, however, sit in judgment on, say, immovable property situated outside the country of its jurisdiction

In other words, as laid down by the Supreme Court of India in one of its judgments, the courts of a country generally impose a three-fold restriction on the exercise of their jurisdiction –

jurisdiction in rem (binding not only the parties but the world at large) by a court over res outside the jurisdiction will not be exercised, because it will not be recognised by other courts

the court will not deal directly or indirectly with tide to immovable property outside the jurisdiction of the state from which it derives its authority, and

the court will not assist in the enforcement within its jurisdiction of foreign penal or revenue laws

The operation of section 13 would be better appreciated by the following illustration: A sues B in a foreign court. If the suit is dismissed, the decision will operate as a bar to a fresh suit by A in India on the original cause of action, unless the decision is inoperative by reason of one or more of the circumstances specified. If a decree is passed in favour of A in the foreign court and A sues B on the judgment in India, B will be precluded from putting in issue the same matters that were directly and substantially in issue in the suit in the foreign court, unless the decision is once again inoperative for the said exceptions

Though a foreign judgment may be enforced by a suit in India, it is not to be supposed that Indian courts are bound in all cases to take cognisance of the suit and they may refuse to entertain it on grounds of expediency

It is also relevant to consider section 14 of the Code. It states –

The Court shall presume, upon production of any document purporting to be a certified copy of foreign judgment, that such judgment was pronounced by a Court of competent jurisdiction, unless the contrary appears on the record


A judgment of an Indian court can only be enforced by proceedings in execution – against that, a foreign judgment may be enforced by proceedings in execution in certain cases only. These are mentioned in sections 44 and 44A of the Code. In all other cases, a foreign judgment can only be enforced by a suit on the judgment. If such a suit is dismissed, no subsequent application to execute that judgment will lie – for it has become merged in the decree dismissing the suit

This stand is brought out through the Code distinguishing between foreign judgments of countries which are ‘reciprocating territories’ and those which are not. Section 44A of the Code reads as follows –

1. Where a certified copy of a decree of any of the superior court of any reciprocating territory has been filed in a District Court [of India], the decree may be executed in India as if it had been passed by the District Court

2. Together with the certified copy of the decree shall be filed a certificate from such superior court staling the extent, if any, to which the decree has been satisfied or adjusted and such certificate shall, for the purposes of proceedings under this section, be conclusive proof of the extent of such satisfaction or adjustment

Reciprocating Territory means any country or territory outside India and so notified

Decree for this purpose means a decree or judgment under which a sum of money is payable, not being a sum payable in respect of taxes or other charges of like nature or in respect of a fine or other penalty, but shall in no case include an arbitration award, even if such an award is enforceable as a decree or judgment

From time to time, the Government has issued notifications recognising the following as reciprocating countries: Hong Kong, Singapore, New Zealand, Cook Islands, Trinidad, Tobago, United Kingdom, Northern Ireland, Trust Territory of Western Samoa, Papua, New Guinea and Bangladesh

When a suit emanates from any of these countries, the concerned Indian court will proceed forthwith to enforce the foreign judgment, provided it is not affected by any of the exceptions enumerated in section 13. If it emanates from any other country, the enforcement would have to be sought by filing a suit in India on the foreign judgment. Again, the Indian court would pass a judgment in terms of the foreign judgment, provided it is not affected by the said exceptions

The decree –

would have to have all the attributes of finality, – would be for payment of a sum of money,

(passed in a foreign currency) could provisionally be claimed in Indian rupees converted at the rate prevailing on the institution of the proceedings, with a right to claim the amount due at the rate prevailing on the date of the courts eventual judgment

would not proceed for enforcement, and, if proceeded with, such proceedings stayed if, in an appeal against it, the judgment-granting country stays its execution

would be enforced even though against a state or a state-owned entity, so far as it relates to commercial activities

could provide for interest on the money claim, in addition to the original amount. If it is silent, interest could be claimed on the decretal amount from the date of filing the suit in India. Costs could also be awarded in consonance with provisions of the Code

A suit on the foreign judgment must be brought within three years from the date of the judgment (Article 101 of the Limitation Act 1963). The pendency of an appeal in the foreign country will not bar a suit on a foreign judgment


There has been a phenomenal growth in international arbitration involving Indian parties – both the governing law and the venue of arbitration are foreign. An award in such a case would be meaningless, unless it can be enforced without hurdles and with the least inquiry and review by the courts where enforcement is sought

An arbitration award can only be enforced when an order is made by the courts of the country where enforcement is sought. This principle is also reflected in the Indian system. In India, foreign arbitration awards, in terms of enforcement, are governed by the Foreign Awards (Recognition and Enforcement) Act 1961 (“the Act”) which gives effect to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards 1958

India had made two reservations while ratifying the Convention, namely –

that it would apply the Convention to the recognition and enforcement of an award only if it was made in the territory of another reciprocating contracting state

that it would apply the Convention only to differences arising out of legal relationships which were considered as commercial under Indian law

There is also the Geneva Convention, adopted by India through the Arbitration (Protocol and Convention) Act 1937

Article l(i) of the New York Convention specifically states as follows –

This convention shall apply to the recognition and enforcement of arbitral awards made in the territory of the state other than the state where the recognition and enforcement of such awards is sought, and arising out of differences between persons, whether physical or legal

Section 7 of the Act, which corresponds with the provisions of the New York Convention, specifies that a foreign award may not be enforced if the party against whom the award is sought to be enforced proves to the court enforcing the award any of the following –

(1) that the parties to the arbitration agreement were, under the law applicable to them, under some incapacity, or the arbitration agreement was not valid under the law to which the parties have subjected it (or, in the absence of any condition thereon) under the laws of the place of arbitration

(2) that there was no due compliance with the rules of fair hearing

(3) the award exceeded the scope of submission to arbitration

(4) the composition of the arbitral authority or its procedure was not in accordance with the arbitration agreement of the parties or (failing such agreement) was not in accordance with the law of the place of arbitration

(5) the award has not yet become binding on the parties, or has been set aside, or suspended by a competent authority of the country in which the award was made

(6) if the court dealing with the award is satisfied that (a) tfie subject-matter of the difference is not capable of settlement by arbitration under the law in India

An arbitration award made outside India is distinct from a foreign judgment (see definition of decree above). Identical with foreign judgments, the Act deals with the question of enforcement of awards of a foreign reciprocating territory as defined in it

So far, the Government has notified the following countries for that purpose: United Kingdom, the Netherlands, United States of America, Sweden, Syria, Philippines, Thailand, Austria, Germany, Switzerland, Czechoslovakia, former Russia, Finland, Greece, Ecuador, Bulgaria, Roumania, Norway, Poland, Hungary, France, Germany, Japan, Tanzania, Nigeria, Tunisia, Ghana and Morocco

Any person interested in enforcing a foreign award may apply in writing to any court having jurisdiction over the subject-matter of the award. The application will be numbered and registered in the court as a suit between the applicant as the plaintiff and the other as defendants. The court will direct notice to be given to the parties requiring them to show cause why the award should not be filed. The court, on being satisfied that the foreign award is enforceable under the Act, will pronounce judgment on it. A decree will follow. No appeal will lie from such a decree except insofar as the decree is in excess of or not in accordance with the award. Several High Courts of the land, including at Bombay, have made detailed rules regarding the procedure and the forms to be used for applications for enforcement of foreign awards

The new Arbitration and Conciliation Ordinance 1996 (which follows the UNCITRAL Model Law and is in the process of being converted into a statute), while repealing both the 1937 and 1961 Acts, retains the existing law. India continues to be a party to the Conventions. It deletes, however, the old irritant which provided that the 1961 Act will not apply to an award arising from an arbitration agreement governed by the law of India. This will rectify the alarm generated by the Supreme Court of India decision in National Thermal Power Corp. v Singer Co. in which it was held that an award made outside India will still be an award on an arbitration agreement governed by the law of India, if the substantive law of the contract is Indian law


Apart from the above, foreign judgments and foreign awards are enforceable in India on the same grounds and in the same circumstances in which they are enforceable in England under the common law, on the grounds of justice equity and good conscience