Would an Indian Court have jurisdiction in an international arbitration agreement, where the parties have provided that the agreement shall be governed by and interpreted in accordance with the laws of California, USA?

This was the issue decided by the Supreme Court of India in the case of Citation Infowares Limited v. Equinox Corporation, [(2009)7SCC220]. Citation Infowares Limited was a company registered in India, while Equinox Corporation was a company registered within the appropriate laws of USA. The parties entered into an outsourcing agreement in Kolkata. When disputes arose between the parties, Citation Infowares Limited invoked the arbitration clause, appointed an arbitrator and requested Equinox Corporation to agree to the appointment. Equinox Corporation did not agree within 30 days and Citation Infowares Limited applied to the Chief Justice of India for appointment of sole arbitrator in accordance with section 11(5) of the Indian Arbitration and Conciliation Act, 1996 [“the Act”].

Citation Infowares Limited argued that Part I of the Act applied to international commercial arbitration even where the governing law was a foreign law, as decided in Bhatia International case, (2002)2 SCR 4112.

As against this, Equinox Corporation urged that where the governing law is foreign law, then the question of appointment of arbitrator also falls in the realm of foreign law and not the Act. According to the Respondent, there was clear-cut agreement between the parties that foreign law would govern the agreement and hence the parties had excluded the provisions of Part I of the Act.

The Supreme Court of India held that the Court would have jurisdiction only if Part I of the Act was applicable. In this particular case, the Court held that one of the contracting parties was an Indian party, the obligation under the contract was to be completed in India and it was difficult to reach any implied exclusion of Part I of the Act. In the circumstances, the law laid down in Bhatia International was binding. The Court therefore assumed jurisdiction and appointed a sole arbitrator to arbitrate upon the disputes between the parties. The sole arbitrator would be entitled to decide upon the procedure to be followed in the arbitration proceedings. However, the law governing the contract would be the law of California, USA.

This case highlights the need for clarity on whether Part I of the Act is to apply in an international commercial arbitration or not. In case the parties want to exclude Part I, the agreement should expressly provide for the same, as it would not be possible to read an implied exclusion.