Determining 'Seat' In International Arbitration : Supreme Court Takes Shift From 'Closest Connection Test', Says Express Designation Of Place Matters
4 months, 1 week ago

Determining 'Seat' In International Arbitration : Supreme Court Takes Shift From 'Closest Connection Test', Says Express Designation Of Place Matters

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In a key ruling on International Commercial Arbitration, the Supreme Court held that when an arbitration agreement grants non-exclusive jurisdiction to a foreign court, that court is considered the "seat of arbitration." Taking a shift from the 'Close Connection Test' to determine the seat of the arbitration, the Court observed that “the more appropriate criterion for determining the seat of arbitration in view of the subsequent decisions of this Court is that where in an arbitration agreement there is an express designation of a place of arbitration anchoring the arbitral proceedings to such place, and there being no other significant contrary indicia to show otherwise, such place would be the 'seat' of arbitration even if it is designated in the nomenclature of 'venue' in the arbitration agreement.” In essence, the Court held that when an arbitration agreement grants non-exclusive jurisdiction to a foreign court without specifying any other court, that foreign court effectively gains exclusive jurisdiction to supervise the arbitration proceedings i.e., it effectively becomes the 'seat of the arbitration'. In such scenario, even if the argument of the petitioner that the non-exclusive jurisdiction clause had been incorporated to confer jurisdiction on other courts too is accepted in toto, even then this Court will not have any jurisdiction to exercise its powers under Section 11 of the Act, 1996 as neither the seat is India nor is the arbitration agreement governed by Indian laws. Relying on the BGS SGS SOMA JV v. NHPC LTD. as approvingly referred in Mankastu Impex Private Ltd. v. Airvisual Ltd., the Court opined that when “only one place has been designated in the arbitration clause, and such place has been categorically fixed inasmuch as there is no scope for the place designated as venue to change in terms of Clause 26, and furthermore, the said clause has explicitly stipulated that the curial law would be the UAE Arbitration and Conciliation rules and there being no other contrary indicia let alone a significant contrary indicia, we are of the considered opinion that the Dubai, UAE has not been designated merely as a venue but rather as the juridical seat of arbitration in terms of clause 26 of the Distributorship Agreement.” “It is the seat of arbitration which determines which court will have exclusive jurisdiction and not vice-versa.”, the court said.

History of this topic

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