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India: A Foreign Arbitration Award May Be Challenged

(Mar. 2, 2008) The Supreme Court of India has ruled that a suit in an Indian court is maintainable against a foreign arbitration award if the award contravenes public policy and the statutory provisions. In its ruling, the bench observed that the provisions of the Arbitration and Conciliation Act, 1996, would apply to the international commercial arbitrations held outside of India. Such provisions apply to international awards unless parties exclude their applicability by express or implied agreement.

The matter came up before the Supreme Court in a dispute that arose in 2005 between Venture Global Engineering (VGE) Incorporated of the United States and Satyam Computer Services Limited (SCSL) of India when they entered into a joint venture agreement in 1999 to constitute a company named Satyam Venture Engineering Services Limited. At the request of the Indian company, the London Court of International Arbitration (LCIA) appointed an arbitrator who directed VGE to transfer the shares to SCSL. Aggrieved, VGE filed a suit in India to set aside the award, and the trial court granted an interim order of injunction restraining SCSL from seeking or affecting the transfer of shares under the terms of the award. Upon appeal by SCSL, the High Court of Andhra Pradesh suspended the trial court's order. Finally, the trial court dismissed the suit, and the appeal against the dismissal was denied.

The Supreme Court allowed the appeal against the order of the High Court and ordered the trial court to proceed with the suit. It directed the parties to maintain the status quo until the conclusion of the suit proceedings. (Court: Suit Can Be Filed Against a Foreign Arbitration Award, THE HINDU, Jan. 14, 2008, available at http://www.hindu.com/2008/01/14/stories/2008011454281300.htm.)