Introduction

• Bhatia International v. Bulk Trading S.A. is a landmark case that deals with the issue of arbitrability of disputes involving foreign parties.
• The case was decided by the Supreme Court of India and has significant implications for international arbitration in India.
• In this case the Court based its decision on the interpretation of Section 2(2) of the Arbitration and Conciliation Act, 1996 (A&C Act), which defines "international commercial arbitration."

Facts

• Bhatia International and Bulk Trading S.A. had entered into a contract for the sale and purchase of goods.
• The contract contained an arbitration clause that specified that disputes would be resolved by arbitration in accordance with the rules of the International Chamber of Commerce (ICC) in Paris.
• The dispute arose between the parties, and Bhatia International initiated arbitration proceedings under the A&C Act.
• The respondent, Bulk Trading S.A., objected to the jurisdiction of the Indian courts to entertain the arbitration proceedings.

Issues Involved

• Whether Part I of the A&C Act which deals with the domestic arbitration process, would apply to international arbitrations seated in India?
• Whether international arbitrations were governed solely by Part II of the act, which incorporates the United Nations Commission on International Trade Law (UNCITRAL) Model Law?

Observations

• The Court held that Part I of the A&C Act, would apply to international arbitrations conducted in India unless the parties explicitly excluded its application.
• The court further said that the provisions related to domestic arbitration, including those dealing with interim relief and appeal procedures, could be invoked in international arbitrations unless the parties had specifically chosen not to apply them.
• The SC clearly allowed parties to international arbitrations seated in India to seek interim relief from Indian courts under Part I of the act.
• It also allowed for the possibility of Indian courts playing a more active role in international arbitration proceedings, which was a departure from the traditional pro-arbitration stance of international commercial arbitration.

Conclusion

• This case expanded the role of Indian courts in international arbitration proceedings, and it also raised questions about the extent to which Indian courts could intervene in such arbitrations.
• The case was later partially overruled by the Indian Supreme Court in the case of Bharat Aluminum Company Limited (BALCO) v. Kaiser Aluminum (2012).
  • In this judgment the SC clarified that Indian courts could only intervene in international arbitrations held outside India if the parties had not expressly excluded the applicability of Part I of the A&C Act.
• Subsequently, in 2015, India amended its arbitration law to align it with international standards.
  • The amended law, known as the A&C Act, 1996 (Amendment Act 2015), specifically limited the scope of Indian court intervention in foreign-seated arbitrations, bringing it in line with the principles of the New York Convention.

Notes

Section 2(2) of A&C Act: This section defines an "international commercial arbitration" as an arbitration relating to disputes arising out of legal relationships, whether contractual or not, which are considered commercial under the law in force in India.