Supreme Court of India delivers landmark arbitration decision in Bharat Aluminium, overruling Bhatia International

The controversial decision of the Indian Supreme Court in Bhatia International v Bulk Trading SA has been overruled by the Indian Supreme Court, paving the way for reduced court intervention in arbitration seated outside of India.

In Bhatia International, the court had interpreted Section 2 of the Indian Arbitration and Conciliation Act 1996 (the Act) in a manner that allowed Part I of the Act (which provided for remedies such as awarding interim relief and setting aside of arbitral awards) to be applied even in the context of arbitration seated outside of India. Several authors and commentators had raised concerns about the impact and desirability of such a wide interpretation.

In light of conflicting opinions on the correctness of the decision in Bhatia International it was referred to a panel of five judges of the Supreme Court for reconsideration in the case of Bharat Aluminium v Kaiser Aluminium.  A key issue the court had to consider was whether Part I of the Act applied to arbitrations conducted outside of India.

The much awaited decision in Bharat Aluminium was delivered by the Supreme Court of India earlier today. Click here for a copy of the judgment. A detailed analysis of the decision (which runs into 190 pages) will follow shortly, but in summary the court held that: 

  • The decision in the case of Bhatia International has been overruled;
  • Part I of the Act (which vests courts with the powers of awarding interim relief in support of arbitration, and setting aside arbitral awards) only applies to arbitrations seated within India;
  • Awards rendered in foreign seated arbitrations are only subject to the jurisdiction of Indian courts when they are sought to be enforced in India under Part II of the Act;
  • Indian courts cannot order interim relief in support of foreign seated arbitrations;
  • The decision of the court in Bharat Aluminium only applies to arbitration agreements entered into after 6 September 2012.

The decision of the Supreme Court appears promising and leads the way for reducing the intervention of Indian courts in arbitrations seated outside India. However, given that the application of the decision is restricted to arbitration agreements entered into after 6 September 2012, the legacy of the decision in Bhatia International will be relevant for some time to come.

The above note is based on a preliminary review of the decision of the court in Bharat Aluminium. Watch this space for a more thorough analysis of the decision.