Alternative Dispute Resolution

Union of India v. Reliance Industries Ltd.

(2015) 10 SCC 213

Citation: (2015) 10 SCC 213
Court: Supreme Court of India
Date: 22 September 2015
Bench: T.S. Thakur, C.J.; R. Banumathi and U.U. Lalit, JJ.

Facts

The Union of India entered into production-sharing contracts with Reliance Industries and foreign commercial partners for exploration and extraction of petroleum.
The contracts were governed by Indian substantive law.
They provided for arbitration seated in London.
The arbitration clause also connected the arbitral procedure with English law.
Disputes arose regarding costs, contractual entitlements and government claims.
A tribunal was constituted.
The Union of India initiated proceedings before Indian courts challenging aspects of the tribunal’s jurisdiction and composition.
It relied upon Bhatia International and argued that:
the contracts were executed before BALCO;
Indian substantive law governed;
Part I therefore applied; and
Indian courts could exercise powers under Sections 14 and 15.
Reliance Industries argued that the foreign seat and curial law impliedly excluded Part I.

Issue

Whether Part I applied to the pre-BALCO agreements.
Whether choosing Indian substantive law prevented exclusion of Part I.
Whether London as seat and English arbitral law conferred exclusive supervisory jurisdiction on English courts.

Rule

For pre-BALCO arbitration agreements, Bhatia International applied only where Part I was not expressly or impliedly excluded.
Implied exclusion may arise from:
a foreign juridical seat;
foreign curial law;
institutional rules;
the contractual structure; and
the intention to place procedural supervision in foreign courts.
Substantive governing law and curial law perform different functions.
Choice of Indian substantive law does not automatically make India the seat or preserve Part I.
The courts of the seat exercise supervisory jurisdiction over:
tribunal constitution;
procedural challenges;
annulment; and
arbitrator mandate.

Application

The Supreme Court read the production-sharing contracts as a whole.
Indian law governed the parties’ substantive contractual obligations.
However, London was expressly chosen as the arbitration’s legal place.
The procedural framework pointed towards English supervisory law.
This demonstrated that the parties had separated:
the law deciding the merits; from
the law controlling the arbitral process.
The foreign seat was not a casual venue for hearings.
It carried the legal consequence that English courts would supervise the tribunal.
Allowing Indian proceedings under Sections 14 and 15 would create concurrent supervision by:
Indian courts; and
English courts.
That would undermine certainty and the juridical significance of the seat.
The Court therefore held that Part I stood impliedly excluded even though the contracts pre-dated BALCO.
The Union’s reliance on Indian substantive law was rejected.
A contract can be governed by Indian law while its arbitration is:
seated abroad;
procedurally governed by foreign law; and
supervised by foreign courts.
The Court also distinguished Venture Global.
In Reliance Industries, the foreign curial framework was sufficiently clear to establish exclusion.
The case strengthened the seat-centred approach before BALCO became prospectively applicable.
Under current law, the conclusion follows even more directly:
Part I ordinarily does not govern foreign-seated arbitration;
challenges to the tribunal belong to the seat court; and
Indian court involvement is restricted to statutory exceptions and enforcement.

Conclusion

The Supreme Court held that Part I of the Arbitration Act was impliedly excluded.
London was the juridical seat and English courts had supervisory jurisdiction.
Indian applications concerning the arbitrators’ mandate were not maintainable.
Use this case for: a foreign seat and foreign curial framework exclude Indian Part I even where Indian substantive law governs the contract.